President Putin Seems to Have Stepped Back From the Brink

Now that President Vladimir Putin has pulled back from the brink in the Ukraine crisis the global markets are even more quiet, doing nothing. According to market participants, the primary reason for the market being so quiet is that there is no volume. Nobody wants to put their money at risk anywhere as long as there is a potential for a wider war in eastern Europe and more trouble in the Middle East.

Negotiations between Russia’s Vladimir Putin and Ukraine’s Petro Poroshenko are continuing, just as the leaders of NATO begin their meeting in Wales. Now we have to see whether the Europeans and the US will stop short of introducing tougher sanctions against Russia and whether they will come up with a strategy for fighting the ruthless insurgents in Iraq-Syria.

If Moscow and Kiev come to an agreement that sticks and if NATO’s members decide not to introduce new sanctions and decide not to place materiel in the Baltics in support of a rapid-response force, we can go back to business as usual. But that is a big “if”.

The Syria-Iraq problems could become a NATO issue. After all, Syria is next door to Turkey and the refugee problem is causing serious dislocations in Turkey. 

The good news with wide-ranging implications is the continued improvement of the US economy. If that continues, the rest of the world’s economies should look forward to good growth prospects.

Meanwhile, Europe brought back the dollar, moving it from the EUR/USD1.3160 level to EUR/USD1.3135. It looks like some of the GBP/JPY carry trade lifted their positions as well by buying yen - now below the JPY/USD105 level - and sterling back below the GBP/USD1.6450 level. Jumpy exchange markets continue.