Home Daily Commentaries USD stronger amid Russia and Ukraine tensions

USD stronger amid Russia and Ukraine tensions

Daily Currency Update

Prelim UK GDP just missed expectation on Friday, coming in at 1% versus an expected 1.1%, but the month-on-month figure beat expectation by 0.3%. A mixed bag of other data releases from the UK showed that trade balance, industrial and manufacturing productions, and prelim business investments all met or beat predictions. Late afternoon on Friday Sterling broke 1.3600 against the US dollar and GBP/EUR broke above 1.1950, until risk appetite took a big dip ahead of the weekend as tensions between Russia and Ukraine grew. Investors tend to move towards the safe haven US dollar during riskier climates.

In the week ahead, the headline data release from the UK will be the year-on-year consumer price index on Wednesday. If inflationary concerns remain after the announcement, this will likely further bolster the potential of future interest rate hikes in the UK.


Key Movers

The threat of war between Russia and Ukraine has added to concerns surrounding high inflation, and the prospect of US Federal Reserve interest rate hikes. The US dollar has been bought as a safe haven currency since Friday afternoon in part due to growing concerns that Russia could invade Ukraine in the near future, with the US national security advisor telling CNN on Sunday that there is a distinct possibility that there will be major military action soon. This has seen the US and other western countries advise their nationals to leave the country.

The US dollar has also been bought on fears that surging US inflation will prompt the Federal Reserve to tighten monetary policy aggressively, starting with a 50 basis point hike in March. Mary Daly, President of the Federal Reserve Bank of San Francisco tried to play down this market expectation. GBP/USD has tested a fall below 1.3500 this morning and EUR/USD has been as low as 1.1310.

Expected Ranges

  • GBP/USD: 1.3440 - 1.3590 ▼
  • GBP/EUR: 1.1910 - 1.1990 ▲
  • GBP/AUD: 1.8940 - 1.9110 ▲
  • EUR/USD: 1.1250 - 1.1340 ▼