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Market Wire - Biden Announces "First Tranche" of Sanctions on Russia, Markets Shrug

CalendarFebruary 22, 2022
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Karl Schamotta - Chief Market Strategist, karl.schamotta@corpay.com

In response to Vladimir Putin’s moves since yesterday, US President Joe Biden announced a “first tranche of sanctions” on the Russian economy, removing access to Western bond markets, placing restrictions on several major banks, and threatening to take additional measures against “elites and their family members”. In a speech given at the White House, the President said, “To put it simply, Putin announced that he’s carving out a part of Ukraine. This is the beginning of a Russian invasion”.

Earlier today, the European Union and United Kingdom unveiled their own sanctions. Europe imposed asset freezes, payment restrictions, and travel bans on at least 27 Russian entities, including all current members of the Duma, several banks and a number of corporations. UK Prime Minister Boris Johnson said the UK would sanction five Russian banks and three high net-worth individuals.

Perhaps most meaningfully, German Chancellor Olaf Scholz halted the approval process for Nord Stream 2, a gas pipeline under the Baltic Sea. The action triggered a rebuke from former Russian president Dmitry Medvedev, who tweeted: “Welcome to the new world where Europeans will soon have to pay 2,000 euros per thousand cubic metres!"

Markets seemed unimpressed with the severity of the measures, recovering from earlier losses as Mr. Biden’s speech continued. With yesterday’s flight to safety almost fully unwound, risk-sensitive currencies like the Australian and Canadian dollars are rallying against the yen and Swiss franc. The euro remains tightly range bound, and the dollar is down slightly on the day. Global oil benchmarks have backed away from the $100 threshold.

The ruble is up almost 200 basis points from the overnight low - although intervention measures from Russia’s central bank may be playing a role.

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