LIVE MARKETS-Ukraine peace could be a double-edged sword for the euro

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UKRAINE PEACE COULD BE A DOUBLE-EDGED SWORD FOR THE EURO

Investors remain sceptical about the prospects of a peace deal in Ukraine ahead of Friday’s meeting between U.S. President Donald Trump and Russia’s Vladimir Putin.

Still, analysts are weighing up the potential impact that an agreement to end the war could have on forex markets — particularly on the euro EUR=EBS.

“The prospect of a 'peace' or a cease-fire of indefinite duration or scope was also enough to weaken the bid for the geopolitical safe-havens last week, such as the Swiss Franc and the yen, and drove flows toward the euro,” notes Thierry Wizman, global forex and rates strategist at Macquarie Group.

Peace would provide greater energy security, and lower energy costs as oil prices are expected to drop.

“Yet one counterpoint to this 'peace' narrative for Europe is that the prospect of European growth and re-inflation may have also been boosted by the war, since the conflict energized new commitments to increase defence expenditure and associated infrastructure expenditure in Europe,” he says.

After highlighting the double-edged impact of a potential peace deal on the single currency, Wizman says euro/dollar would rally further under a ceasefire or full peace agreement — especially if defence spending remains elevated.

(Stefano Rebaudo)

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EARLIER LIVE MARKETS POSTS

EUROPE BEFORE THE BELL, CATCHING BREATH CLICK HERE

MORNING BID: BITCOIN JOINS THE RISK-ON PARTY CLICK HERE