The breaking news about a “permanent” ceasefire between Ukraine and Russia triggered a relief rally that sent EUR/USD up alongside stock markets. The much needed good news from the region could be short lived.
Is it all over for real? Here are 5 reasons to doubt the move:
- Confirmation only from Ukraine: The announcement of a “permanent” ceasefire came out only from Kiev. The Kremlin only said said that a conversation will take place. Update: Putin’s spokesman did not wait too long to say that no ceasefire was agreed upon, as Russia is not a side in the conflict.
- Previous ceasefires have broken down: This is not the first ceasefire in the conflict. Russian and Ukrainian leaders are in contact and have already met in Minsk recently. This didn’t stop the recent violence and recent “incursion” of Russia into Ukraine. So, it is not too hard to doubt this ceasefire.
- Responding to international pressure: US President Obama is visiting Estonia, another ex-Soviet country ahead of the NATO summit in Wales. There were reports about a 4000 strong “fast response” task force from NATO. Update: Obama mentions Russian aggression in Ukraine but does not mention a ceasefire.
- EU Ultimatum: In addition, the EU set an ultimatum to Russia to enact more sanctions if Russia doesn’t back off. These “Winds of Change” from Moscow (still awaiting confirmation) could be meant to stave off this pressure and get the world off Putin’s back before the next move.
- Ukrainian army retreats: The timing of the move also comes after the Russian backed rebels have made significant gains against the Ukrainian army, basically forcing them to retreat from both the areas of Donetsk and Luhansk, as well as the new front that Russia opened closer to the Black Sea. Putin may be consolidating his gains before the next move.
All in all, Vladimir “Master of Surprise” Putin might be making a tactical retreat while all the world is watching, and might later take another bite out of Ukraine after the world’s short attention span has moved elsewhere.
And like with this ceasefire, also EUR/USD could see a consolidation of the recent fall,. making the necessary correction before resuming its slide.
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