File image of Volodymyr Zelensky. Copyright: European Union.
There's growing hope that an end to the Russian invasion of Ukraine is near.
The news is galvanising the euro, which is rallying against all peers at the start of the new week.
The euro-to-pound conversion trades a 0.15% higher on the day at 0.8807, while euro-to-dollar rises by a third of a percent to 1.1548.
"We've been here before, but prospects of a peace deal in Ukraine are starting to show in FX," says Chris Turner, head of FX analysis at ING Bank N.V.
Eastern European currencies are leading the chart, naturally, owing to their geographical exposure to the invasion of a country that many European states share a border with.
"Lower energy prices should be supportive for the euro," says Turner.
U.S. President Donald Trump last week unveiled a plan he drew up with Russia to bring the war to an end, however, this was largely rejected by Ukraine and European allies.
Subsequent meetings in Geneva between the U.S., European nations and Ukraine are furthering those plans into something that might be accepted by all sides.
"Something good just may be happening," Trump said on Monday, referencing the latest developments in the talks.
Ursula von der Leyen, the European Commission’s president, on Monday said “good progress" had been made in the peace talks in Geneva.
In September, we reported on research from Swedish bank SEB that showed the euro could rally by as much as 7.5% against the dollar if a credible peace agreement is struck between Russia and Ukraine.
Analysts said a breakthrough would be a "game changer for European growth and inflation dynamics" by boosting household spending power and reigniting the manufacturing sector.
"EUR/USD upside would be front-loaded via equities, with energy a modest tailwind and rates reinforcing over time," SEB wrote in its Macro & FICC research note.
Amongst the group of the world's largest freely floating currencies, the euro is the second-best performer, coming in just behind the NOK, which is itself also highly leveraged to risk sensitivities and is doing well as a result of rising hopes for peace:
Other markets are reflecting the developments:
Crude oil prices were on the back foot with Brent at a one-month low, usually a signal that markets see easing threats to Russian supply and the eventual lifting of sanctions.
"The comments and the apparent speed at which we could be careening towards a peace deal has also shocked defence stocks, which are sliding again today. Rheinmetall, the big ammo maker from Germany, slid another 4% to take its decline to 25% since its September peak," notes Neil Wilson, analyst at Saxo Bank.
He notes that Sweden's Saab and Italy's Leonardo were also lower "in a broad peace-hope-sell-off", with UK defence stocks BAE Systems, Rolls-Royce and Babcock weighing on gains for the FTSE 100.