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- Euro and rouble to nosedive if a full-blown war breaks out – Danske Bank
Euro and rouble to nosedive if a full-blown war breaks out – Danske Bank
Military escalation has started in Eastern Ukraine. Strategists at Danske Bank now see a diminishing probability for a peaceful solution and raise the probability for a full-blown war. The latter would trigger a substantial fall in RUB, weaker EUR and weaker Scandies.
The threat of war is rising but diplomacy is still alive
“We now place a 50% probability of the conflict remaining contained in Eastern Ukraine but update our probabilities for other scenarios. We see a 30% probability of a large-scale Russian attack on Ukraine, including invasion of key cities like Kiev, and only a 20% probability of de-escalation as a result from a diplomatic deal.”
“As long as the military escalation remains contained in Eastern Ukraine, we see USD/RUB in 77-80 range in the short-term, but in case of a full-blown war, USD/RUB could go above 85.”
“In case of an escalation, we should expect to see markedly lower EUR/USD (e.g. 2-3 figs) and Brent above $100/barrel. In currencies, Scandies and Eastern Europe can drop 1-3% versus the EUR and equity markets can probably (initially) drop a few percent in the worst-case scenario.”
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