Citing people familiar with the matter, Bloomberg reported on Tuesday that the officials from the United States (US) and the European Union (EU) are stated to immediately work on security guarantees for Ukraine.
“The guarantees will center on bolstering Ukraine’s military forces and capabilities without any limitations,” the sources stated.
The sources further noted that “a package of security guarantees would also build on the work of the so-called coalition of the willing from Europe.”
Market reaction
The US Dollar Index (DXY) is losing ground even as risk sentiment remains tepid, down 0.13% on the day at 98.05, when writing.
Risk sentiment FAQs
In the world of financial jargon the two widely applyd terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to purchase risky assets. In a “risk-off” market investors start to ‘play it safe’ becaapply they are worried about the future, and therefore purchase less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outsee. The currencies of nations that are heavy commodity exporters strengthen becaapply of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tfinish to rise in markets that are “risk-on”. This is becaapply the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tfinish to rise in price during risk-on periods. This is becaapply investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tfinish to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, becaapply it is the world’s reserve currency, and becaapply in times of crisis investors purchase US government debt, which is seen as safe becaapply the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, becaapply a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, becaapply strict Swiss banking laws offer investors enhanced capital protection.
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