The European currencies gained support on the view that there could be an end to the war in Ukraine and a ceasefire, but what are the chances of a ceasefire, and what currencies will be impacted if there isn't one? Our views below and a few pairs to watch.

Deal or no Deal?

The European currencies have rallied on news of a potential deal to end the war, but “After an initial positive spillover on the euro from news of Trump meeting with Putin next week, markets now need to assess how realistic a truce is. We expect they will tread carefully on the topic, considering there are few indications so far that Russia is ready to agree to a total ceasefire in Ukraine.” (ING THINK)

The meeting is a bit surprising as nothing has fundamentally changed in the warring sides' stances.

Moscow has not backed off its war goals, and will not budge from wanting all four eastern territories and Crimea recognised as part of the Russian Federation. Also, Ukraine cannot be a member of NATO, cannot have a large military force, and must be free of what Russia sees it Nazi influences. These conditions are, of course, totally rejected by Ukraine and Zelensky.

Will Trump agree to them? It's hard to see a deal happening after Trump's strong words against Russia and Putin and the secondary sanctions imposed, so why meet?

We don't see a reason - Putin cannot back down, public opinion is firmly against giving concessions, and so is the military, which Putin will not want to anger. Also, why would Russia back down when they clearly have the advantage on the battlefield and are close to taking many key towns and areas, although this is not admitted in the West, but the maps show the situation. Ukraine is near collapse, with a shortage of manpower and equipment that cannot be solved quickly.

On the other side, can Trump agree to Russia's terms – if he does, it would be a huge climb down which seems at odds with his stance at present.

What about the Europeans? They have spent huge sums of money on the conflict and have committed to spending more on aid. Will they carry on supporting Ukraine even if Trump wants to deal with Putin? We think they probably would, as because ending aid after the huge amounts committed will not be palatable to the hawks within the EU.

If there is no ceasefire, then the EUR looks set for lower prices against both the USD and the CHF. Also, the minor European currencies correlated with the EUR, such as USD/PLN and USD/SEK. We are bearish on the European currencies anyway and think a no-deal scenario in terms of Russia and Ukraine is likely and will boost the USD and CHF.

Trade Setups

Below, see our view of the key technical levels to watch in EUR/USD, EUR/CHF, USD/PLN, and USD/SEK.

EUR/USD 

EUR/CHF

USD/PLN

USD/SEK