The summit in Alaska between US President Trump and Russian President Putin generated some diplomatic optics but no resolution or ceasefire. Talks reportedly centred around land swaps, security guarantees and the outline of a trilateral format with Ukraine. Trump claimed big progress, but most observers conceded that even the optics favoured Russian president Putin. Putin’s proposal demands sweeping Ukrainian concessions – withdrawal from Donetsk and Luhansk and recognition of Crimea – conditions which Kyiv has repeatedly rejected. In short, each side repeated what they have always said – there did not seem to be any major shift in position, Commerzbank's FX analyst Tatha Ghose notes.

Near-term resolution is unlikely

"European leaders also repeated their pre-existing positions following the summit: Britain, France, Germany and Italy stressed that international borders must not be changed by force and warned that they would back further sanctions if needed. French president Macron emphasised that pressure on Russia had to be maintained and that any peace must come with 'unwavering security guarantees'. Perhaps one interesting development was an European proposal to offer article 5 'like' protection to Ukraine (without formal NATO membership)."

"More meetings among leaders are now scheduled on this issue, but so far, what appears clear is that a near-term resolution is unlikely. Putin is angling for a full and final peace treaty (not ceasefire), which will include all his demands. It is difficult to see how this path leads to a solution where some sanctions on Russia will be removed in any foreseeable timeframe. Removal of (some) sanctions could be realistic only as part of a peace treaty which was achievable and imminent. This does not appear realistic under any scenario – if anything, a retaliatory escalation appears the most likely outcome. Perhaps the next stage may involve less US aid support for Ukraine, but the EU would have to pick up part of the slack."

"Meanwhile, financial and trade restrictions on Russia will persist, and may even tighten. Russian oil trade will likely emerge as the central target of the west’s escalation. For the rouble exchange rate, this means no upside: the economy will continue to face the drags it has been facing over the past quarter, with exports and imports both in prolonged slump and oil and gas revenue contracting. We forecast USD/RUB to trend up over the coming year."