Russia/Ukraine tensions rising: British gov says it has uncovered a plot by Moscow to install a pro-Russian leader in Kiev

Ross J Burland FXStreet

The BBC reports that ''the UK has accused Russia’s President Vladimir Putin of plotting to install a pro-Moscow figure to lead Ukraine's government.''

The news was reported on Sunday after the Deputy Prime Minister Dominic Raab told the BBC's Sunday Morning programme that there was "a very serious risk" of invasion but there would be "severe economic consequences", including sanctions, if Russia took that step.

Geo-politics has been present in the markets again as Russia-Ukraine tensions continue.

The US dollar is renowned for benefitting from such angst in geopolitics and markets, so such an escalation should be a clear dollar positive for the open this week. If the US administration sends troops over, which is being considered, then this would intensify matters even more.

This would be a double whammy for the euro due to the view that Europe’s dependence on Russia’s energy exports would be exposed even more.

Key notes

The BBC article stated the following:

''Russia has moved 100,000 troops near to its border with Ukraine but denies it is planning an invasion.

UK ministers have warned that the Russian government will face serious consequences if there is an incursion.

In a statement, Foreign Secretary Liz Truss said: "The information being released today shines a light on the extent of Russian activity designed to subvert Ukraine, and is an insight into Kremlin thinking.

"Russia must de-escalate, end its campaigns of aggression and disinformation, and pursue a path of diplomacy."

Deputy Prime Minister Dominic Raab said there was "a very serious risk" of invasion but there would be "severe economic consequences", including sanctions if Russia took that step.

However, he told the BBC's Sunday Morning programme it was "extremely unlikely" British troops would be sent to defend Ukraine, adding that the country was not a Nato ally.''

DXY daily chart

As per the DXY index, which measures the US dollar vs a basket of currencies, the greenback declined on Friday, along with US Treasury yields. Despite the risk-off price action displayed in the US stock market and concerns over Russia, the US dollar was pressured as investors looked through the headlines and instead towards this week's Federal Reserve meeting for more clarity on the outlook for rate hikes. However, a close eye will be paid to this type of escalation for today's open and the support could be expected to hold around the 61.8% Fibonacci level if safe haven flows dominate.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

AUD/USD struggles near 0.7150 as Fed hike bets and Middle East risks underpin USD

AUD/USD kicks off the new week on a weak note and hovers near Friday's low, around mid-0.7100s, as the US Dollar holds up on rising Fed rate-hike bets, bolstered by the US CPI. Furthermore, escalating Middle East tensions and clashes in the Strait of Hormuz underpin the safe-haven USD. However, hawkish RBA expectations could help limit deeper losses for the Aussie.

USD/JPY holds steady near mid-153.00s as traders await Fed/BoJ rate decisions

USD/JPY consolidates near a seven-month low touched last Tuesday as traders move to the sidelines ahead of the FOMC decision on Wednesday and the BoJ policy update on Friday. Meanwhile, a more hawkish repricing of the BoJ's normalization path supports the Japanese Yen, while rising Fed rate-hike bets and geopolitical risks underpin the US Dollar, leading to the pair's subdued price action at the start of the new week.

Gold consolidates above $4,300 as traders await Fed rate decision this week

Gold struggles to capitalize on Friday's modest bounce from sub-$4,300 levels and kicks off the new week on a subdued note as traders move to the sidelines ahead of a slew of central bank events. Meanwhile, the latest US inflation figures reaffirmed September Fed rate-hike bets and cap the non-yielding bullion. Moreover, escalating US-Iran tensions act as a tailwind for the safe-haven US Dollar, keeping XAU/USD bulls on the back foot.

Week ahead: Fed, BoJ and BoE decide amid inflation dilemma

A crucial central bank week looms for markets as both the Federal Reserve and Bank of Japan are under pressure from all sides, with their credibility at stake. The Bank of England looks set to have an easier ride, at least for now, while inflation releases will be watched too as war continues to rage in the Middle East.

CFTC Report: Japanese Yen reversal leads a broader positioning reset

The week in one sentence: Yen positioning swung back into net longs in the week to September 8, leading to a 103.0K-contract improvement. Canadian Dollar shorts also fell sharply, while Oil buying accompanied another price rise. Euro, Sterling and Swiss Franc positioning weakened despite firmer currencies, leaving those moves unconfirmed by speculative flows.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.