We see a very clear trading theme so far In the asian session how long does the Risk of sentiment last for one of the Biggest kind of casualties that you see Uh as as as we see really kind of An interesting dynamic here when it Comes to dollar demand in particular [Music] So We're just few days into Kind of a once in a lifetime Reorientation in the world order so that This transition is not going to be a Smooth one so we simply have to accept That uncertainties will remain very high In next few weeks And that will be the story of uh Volatility for the markets uh you know For next few weeks if not months and Quarters In terms of uh the situation in ukraine Which is essential here For the markets it's increasingly clear That russia has not been able to exploit The initial shock you know attempt into Meaningful tactical gains There's now An overwhelming argument in favor of a Negotiated settlement that we have to Assume that new attempts will be made Again and seizing the upper hand uh you Know despite this effects as uh moscow Has taken more or less uh stick its uh Credibility um uh and thus you know
Potentially stability on this invasion So this results that we're still in the Early innings of the conflict Um and we as investors you know hope for A quick resolution of the situation but We have to be humble here and Acknowledge that the scope for even more Troubling escalation in and outside Ukraine remain open For sanctions we now have an extremely Punitive combination of economic and Financial restrictions being applied to Russia But We will have a period of significant Hearts for the russian economy and Additional disruption in the global Supply chain And the under the assumption under our Sort of lack of negotiated settlement Uh you know we still expect a crisis Like condition in russian economy Shocked the global growth was you know 50 40 50 basis point and further rise in Inflation so for the markets We now have a situation where the most Essential buyer Of the russian rule is missing from the Currency markets uh due to the new Freeze on russia central bank so we'll See some dramatic days for the currency Markets for sure but for the asia Markets of course we'll continue to have To grapple with the significant
Disruptions of global trade and the Pressures on the global supply chain so Visibility is very poor and we're set For still uh you know at least few more Weeks of volatility in the markets Uh you know for this one that visibility Is is is very poor and that's key for Central banks as well as they look to Kind of work out what their next steps Are i mean i want to take you to our Question of the day on our mlive blog It's how long before the next global Recession we already know that those Risks were building if you take a look At the flattening of the treasury curve And also the moving forward of Potentially the next fed rate Cut right as we see the kind of Increased hawkishness does this really Heighten the risks of a policy mistake And potentially move forward that Anticipation of a recession So We think uh one of one of the new things About the fed policy framework and maybe To elected degree the other central bank Is that they're Quite more flexible compared to the Previous rate hike cycle so we really Don't think assuming a degree of inertia For fast rate hike is the right thing to Do at this structure we think they're Quite open So right now inflation fight is the the
Main goal and and this is why this is Why you know many central banks will Start heightening this year But next year it we we cannot simply Assume that uh you know the same pace of Height will continue and in fact bond Markets already looking through uh this Episode and as you said pricing a degree Of you know potential stakeholder or Recessionary outcome on the horizon if You look at the u.s yield curve for Instance if you simply you know look at The one year forward a two year forward Yield curve it's completely flat so Already there is a pricing for you know Geopolitical disruptions as well as you Know potential policy gridlock in dc Um and the impact of uh you know Tightening that will be done this year So In our view um uh the tightening is Definitely the story this year but we Shouldn't assume too much and Extrapolate too much uh you know for the Next year um and so that's uh that's uh One kind of key mantra that we have as We go forward holmen you're going to get A lot of calls today a lot of calls and Earlier we were speaking with mark Cudmore from our m live team about the Search for liquidity that that's all That's going to be on investors minds Over the next few days is there enough Of it out there will we have to see
Banks stepping in and offering swap Lines and all sorts of crisis era Instruments That's uh that's the central question For the markets uh especially today um Because we have a situation where The the you know the usual lander of Dollar liquidity uh is certainly missing From the market due to this new Restriction on the on russian central Bank Our uh thinking here is that this will Uh Require some reaction from key central Banks including the fed um so for the Global markets to kind of you know to Navigate this environment uh uh you know Uh you know they will require Uh you know for the u.s domestic markets Uh you know the the use of sending repo Facility for the fx market uh it's Probably necessary That uh you know the fx swap lines and The Um uh the fema repo lines are now open For the other central banks to use so That's potentially a decision that could Happen as early as today so we will keep Watching that development
