NZD/USD bulls move in for the kill on the Russian & Ukraine peace talk positives

NZD/USD is trading near 0.8% higher on the day in a risk-on setting as the US dollar bleeds out following positive progress in Ukraine and Russian peace talks. The pair has rallied on Tuesday from a low of 0.6875 to a high of 0.6945 so far. 

''While overall FX market volatility has been elevated (with EUR/USD surging 1½ cents before coming back a touch and USD/JPY now about 2½ cents off Monday night’s peak), AUD and NZD have been much calmer against the USD (but more volatile on crosses),'' analysts at ANZ Bank explained.

Meanwhile, Russia promised on Tuesday to scale down military operations around Ukraine's capital and north, while Kyiv proposed Ukraine join the EU while adopting neutral status by not joining NATO. 

This sparked off a risk-on wave during the peace talks that are taking place in an Istanbul palace more than a month into the largest attack on a European nation since World War II. There was a heads up on Monday, however, and was something telegraphed by Financial Times Monday which had already led to an improved risk-on environment for the week. 

''Talks successful enough for a possible meeting between Putin and Zelensky, says Ukrainian presidential advisor Mykhailo Podolyak. “We have documents prepared now which allow the presidents to meet on a bilateral basis," he said.

However, Russia's top negotiator has warned that there is still a long way to go until a mutually acceptable agreement with Ukraine is reached and de-escalation around Kyiv and Chernihiv does not mean a cease-fire. British Prime Minister Boris Johnson said a ceasefire agreement in Ukraine will not be enough to lift British sanctions against Russia. US president, in the same vein, says that the US will keep sanctions. 

In more recent trade, Ukraine's Volodymyr Zelenskyy has said that signals from talks with Russia could be called positive, but these signals don't drown out explosions of Russian shells.

Overall, ''the NZD story is a good one, but having “gone early” with the recovery and hikes, it may not be as good as the AUD story; so, could we be in for a period of slight gains against the USD but losses against the AUD as the latter re-awakens,'' analysts at ANZ Bank said.