In the end, EUR/USD was virtually unchanged. At one point, the euro was down 0.7% against the USD. This was due to two successive pieces of news, both of which brought the geopolitical risks in Europe back into investors' focus, at least for a short time. The first was the news that Ukraine had used so-called ATACMS weapons against a target in Russia, having only recently been approved for this kind of use by the US. The second was the news that Putin had changed the Russian nuclear doctrine to allow Russia to respond to large-scale conventional attacks with a nuclear counterstrike. Particularly to the latter news European currencies reacted with significant losses, Commerzbank’s FX analyst Volkmar Baur notes.

The next Treasury Secretary can be interesting to look at  

“The market quickly realised that this was probably just another in an already long series of nuclear threats from Russia. A real deployment would be thin ice for a country that is now heavily dependent on Chinese imports and that has been explicitly warned against such a deployment by China. Moreover, it quickly became clear that Western intelligence services were unaware of any preparations in Russia for such an operation. As a result, European exchange rates recovered as the day went on.”

“ The appointment of the new US Treasury Secretary, the most important yet to be filled position in the new US administration, is still eagerly awaited. For a long time it seemed relatively clear that Wall Street veteran Scott Bessett would get the nod. However, rumours emerged last week that Howard Lutnick had also expressed an interest. Bessett is seen as Wall Street's favourite, but the Trump team recently seemed to have doubts about how much he would support the planned import tariffs. Lutnick's chances therefore seemed to be growing until yesterday, when he was appointed as head of the Commerce Department. As is so often the case, a third party now appears to be rejoicing as two sides squabble. Marc Rowan, another Wall Street veteran, is now the favourite.

“The market will be looking at the extent to which unconventional economic policies can be expected under the new Treasury Secretary. In the short term, the appointment of a Wall Street veteran is likely to reassure currency traders. In the medium term, however, it remains to be seen how much leeway even an experienced Treasury Secretary will have to push against unconventional ideas coming from a Trump 2.0 administration.”