On Friday, US President Joe Biden outlined a three-stage ceasefire plan aimed at de-escalating the conflict between Israel and Hamas that seemed to have claimed about 36,000 lives since the war began last October.
A senior US administration official confirmed that the four-and-a-half-page proposal had been endorsed by the Israeli government and presented to Hamas on Friday.
President Biden's proposal included an initial six-week phase in which Israeli forces would withdraw from populated areas of Gaza. It also involved a prisoner exchange, releasing several hostages, including women, the elderly, and the wounded, in exchange for hundreds of Palestinian prisoners, per CNBC News.
Israeli Prime Minister Benjamin Netanyahu, however, rejected the idea of a permanent ceasefire, noting that "Israel’s conditions for ending the war have not changed: the destruction of Hamas’s military and governing capabilities, the freeing of all hostages, and ensuring that Gaza no longer poses a threat to Israel."
Speaking to ABC News on Sunday morning, US National Security Council spokesman John Kirby said that the US had "every expectation" that Israel would "say yes" to the proposed ceasefire deal if Hamas accepts.
"We're waiting for an official response from Hamas," he said, adding that the US hopes that both sides agree to start the first phase of the plan "as soon as possible".
Hamas welcomed US President Biden's cease-fire proposal for Gaza, affirming its readiness to deal positively with any proposal that offers a permanent cease-fire, complete withdrawal of Israel forces from Gaza, restructuring of the strip, return of displaced and a serious prisoner hostage exchange, Reuters reports.
Despite Hamas's positive response, Netanyahu's rejection of the ceasefire plan points to a significant obstacle to the proposed roadmap's implementation.
Amidst Israel’s firm stance on the ceasefire proposal, Hamas’s response is adding to the market’s optimism on hopes of a likely ceasefire. The US Dollar Index is losing 0.10% on the day to trade near 104.50 while the US S&P 500 futures, a risk barometer is up 0.30% so far. Meanwhile, Gold price is testing the key support near $2,330, as of writing.
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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