Euro Up, Crude Oil Prices Down as China Sounds Off on Ukraine Crisis

Euro Up, Crude Oil Prices Down as China Sounds Off on Ukraine Crisis


  • China signals opposition to Russian invasion of Ukraine, cooling market fears
  • Fed rate hike outlook moderates after key officials call for gradual tightening
  • Crude oil prices testing below $90/bbl after undoing last week’s pivotal break

The Euro rose alongside S&P 500 stock index futures – a bellwether for market-wide risk appetite – amid renewed hopes for a diplomatic solution to the crisis brewing at the border between Russia and Ukraine. That is after China’s Foreign Minister Wang Yi signaled Beijing’s opposition to any would-be invasion of the latter country by the former at the Munich Security Conference over the weekend.

Mr Wang’s language was unambiguous. “The sovereignty, independence and territorial integrity of any country should be respected and safe-guarded,” he said, pointedly adding that “Ukraine is no exception.” That goes a long way to clarify Beijing’s stance after President Xi Jinping issued a joint statement with Russia’s President Vladimir Putin opposing NATO expansion just earlier this month.

Sino-Russian relations have blossomed recently. Trade between the two countries surged to a record of nearly $147 billion in 2021, up almost 36 percent from the prior year. With China weighing in against Russian military action in Ukraine alongside the US and the European Union, Moscow would compromise a key economic outlet at a time when it most needs one, especially if hostilities were to proceed.

Chart created with TradingView

Markets have seemingly judged that this makes de-escalation likelier than before. Gold prices fell alongside the anti-risk US Dollar and Japanese Yen. Capital seems to reflexively flow to the yellow metal at times of geopolitical instability, so its retreat together with standby liquidity-haven currencies looks telling. A parallel drop in crude oil prices may portend easing supply disruption fears. Russia is a top-3 global oil producer.

A downshift in Fed rate hike expectations may have also helped lift market spirits. The priced-in 2022-24 policy path implied in Fed Funds futures shed 40 basis points (bps) last week. That’s nearly two standard 25bps increases. This follows moderating comments from influential New York Fed President John Williams and Governor Lael Brainard, who has been nominated for Vice Chair.

Fed rate hike bets for 2022-24 down after Williams, Brainard speak

Chart created with TradingView

Looking ahead, liquidity across global markets is likely to be relatively thin as the US remains closed following the weekend for the Presidents’ Day holiday. This might make for choppier trading conditions than usual. Flash PMI data from the Eurozone and the UK headline the economic calendar and are expected to show growth picked up a bit in February. Hawkish-leaning Fed Governor Michelle Bowman is due to speak.


Crude oil prices retreated, slipping back below the inflection zone just below the $93/bbl figure and seemingly overturning last week’s upside breakout. Immediate support is at 88.41. A daily close below that may open the door for a slide to retest the downside barrier anchored at 84.65. Alternatively, a push back above the outer layer of immediate resistance at 92.72 may expose the swing top at 95.82.

WTI crude oil chart - technical analysis

WTI crude oil chart created withTradingView


— Written by Ilya Spivak, Head Strategist, APAC at

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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