I wrote last week about the opportunity in selling USD/RUB on the possibility of no war in Ukraine. The thinking is that RUB is deeply undervalued on war worries and isn't close to reflecting the price of oil and gas.
With some positive murmurs from Putin and Macron, the market appears to be shifting on its thinking around a conflict. With that USD/RUB is down to the lowest since January 13.
This is obviously good news but it presents some downside risks for commodities.
Of course, it could all change in the blink of an eye as well. Most forecasts said Russia would be ready for military action around the second week of February and we're just entering that window.
The US yesterday threatened that the Nordstream 2 pipeline wouldn't open if there's a military invasion. Interestingly though, Germany's chancellor didn't mention the natural gas pipeline.
Last month, the German defense minister also warned against drawing the pipeline into the conflict.
So aside from signaling that a conflict may not occur, the market may be sensing that sanctions against Russian oil and gas, a SWIFT suspension or blocking of Nordstream 2 are unlikely.
