Gold prices steady amid Fed rate cut hopes; Trump-Putin talks awaited
JPMorgan expressed that a potential ceasefire or peace agreement to conclude the conflict between Ukraine and Russia could be a "net positive" for the currencies of nearby emerging economies. However, the investment bank noted that much of this potential uplift might already be reflected in current valuations.
JPMorgan is maintaining a "market weight" stance on Ukrainian government bonds, citing the need for more clarity on the details of any peace deal. The bank highlighted that the probability of a lasting peace agreement being reached is already priced into sovereign debt markets at around 70%.
In the event of a durable peace deal, JPMorgan anticipates that Ukrainian bonds would likely see the most significant positive impact. However, the bank pointed out that GDP warrants, which are bond-like instruments paying out when Ukraine’s economy grows robustly, could have a more "limited" upside.
The recent initiative by U.S. President Donald Trump to engage in talks with Russia about ending the war, which has been ongoing for nearly three years, has surprised Ukraine and European capitals. This development has led to intense speculation about the potential structure of a ceasefire.
JPMorgan also noted that Hungary and Turkey’s currencies could benefit significantly if a ceasefire leads to lower European gas prices, due to the potential for Russian gas to be purchased more freely. Hungary, in particular, has a substantial dependence on gas, with its peak gas import bill in 2022 representing 4.9% of its GDP.
Despite the potential economic benefits of a post-war reconstruction in Ukraine, which may require up to $50 billion per year, JPMorgan cautioned that the risk of the conflict reigniting could dampen enthusiasm for large-scale reconstruction efforts.
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