If you're trading anything in the market right now, you're definitely trading the war narrative. But what exactly is it seems to be up for interpretation at this stage.
There were some volatile and big moves yesterday, with the likes of oil plunging by over 12% and European indices climbing by over 7%.
We're all trying our own views into the narrative and make sense of it but sometimes, the simplest explanation is the best. These are volatile times and when it comes to a market that has been shaken out quite a bit, outsized moves are perhaps not out of the ordinary.
The moves yesterday i.e. euro higher, equities surging, oil plunging, gold lower, are consistent with a "war off" narrative but are we actually there yet? I don't think so.
Sure, there is dialogue taking place between Russia and Ukraine with Lavrov and Kuleba also set to meet today. But the situation on the ground hasn't changed and the overall mood surrounding talks aren't positive whatsoever.
While we're not exactly engaged in a full tilt towards "war on", it's not exactly "war off" either I would argue.
Yet, the market decided to run with the moves yesterday and it is what it is. All I can say is headline risks are still a key factor to be wary about and even with the optimism in the day before, we're not past the eye of the storm just yet.
Sure, the trade in wars is always to fade it i.e. buy value, sell hysteria. I love me a good fade trade but I'm not sure if the boxes are checked for the tide to turn completely.
