Ceasefire or Peace Deal in Ukraine: Potential Impacts on Emerging Market Currencies
A ceasefire or peace settlement between Ukraine and Russia could have a positive impact on the currencies of neighboring emerging economies, according to a recent research note from investment bank JPMorgan. However, the note cautions that much of this potential boost may already be priced in.
JPMorgan maintains a neutral stance on Ukrainian government bonds until more clarity emerges on the details of a peace agreement. The note highlights that sovereign debt markets currently estimate a 70% probability of a durable peace deal.
In a best-case scenario, Ukrainian bonds would likely experience the most significant upward momentum, while Ukraine's GDP warrants would have a more limited upside.
Beyond Ukraine, the currencies of Hungary and Turkey are projected to benefit the most if a ceasefire agreement facilitates a reduction in European gas prices by easing restrictions on Russian gas imports. Hungary's gas-intensive economy makes it particularly vulnerable to fluctuations in gas prices.
While Ukraine's economy is expected to recover from post-war reconstruction efforts, JPMorgan cautions that ongoing geopolitical risks may limit large-scale reconstruction activities.