US Softens Stance on Ukraine Peace Talks, Markets React Cautiously

Geopolitical developments surrounding the ongoing Ukraine conflict have captured market attention as the United States moderated its previous stance on a Thursday deadline for Ukraine’s acceptance of a peace agreement with Russia. A new **19-point peace deal** is slated for discussion in the coming days, although the outlook remains uncertain.

German Chancellor **Olaf Scholz** downplayed the likelihood of significant breakthroughs in negotiations this week. In contrast, the Kremlin has adopted a cautiously optimistic tone, as noted by **Francesco Pesole**, an analyst at ING. The mixed signals from both sides have left financial markets in a state of tentative observation.

Despite the potential for a shift in the geopolitical landscape, the currency market’s response has been muted. There has not been a notable increase in high-beta European currencies, nor has there been significant upward pressure on the **Swiss franc**, a favored safe haven for investors amid European risks. Pesole indicated that while upcoming US data could act as a trigger for market movement, immediate reactions are expected to be limited.

Today’s data release will include **retail sales**, which are projected to show resilience, alongside a slight decline in consumer confidence, anticipated at **93.5**, nearing consensus estimates. The **Producer Price Index (PPI)** for September is expected to align with forecasts, reflecting a month-on-month increase of **0.3%**.

On the Federal Reserve front, both **Chris Waller** and **Mary Daly** have expressed support for a potential interest rate cut in December. Although Daly is not a voting member this year, her stance adds dovish pressure to the Federal Open Market Committee (FOMC) as they navigate a closely contested decision. Markets are currently pricing in a **19 basis point** easing for December. Despite these developments, the US dollar has demonstrated resilience, bolstered by ongoing year-end rebalancing flows ahead of the Thanksgiving holiday.

As the geopolitical landscape continues to evolve, the dollar appears strong relative to short-term rate differentials, presenting potential downside risks in the near future. Observers will be closely monitoring how the situation unfolds as peace talks progress and economic data is released, keeping the focus on the **US Dollar Index (DXY)**, which is approaching key resistance levels.

In summary, while the prospect of peace talks offers hope, the market’s cautious stance reflects the complexities of the current geopolitical and economic environment. Investors are advised to remain vigilant as the situation develops, particularly with significant data expected from the US in the coming days.