Markets remain volatile as Russia’s invasion of Ukraine continues
Tuesday 8 March, 2022
Daily Currency UpdateThe British pound strengthened to another 5 and a half year high versus the euro yesterday but dropped to its weakest point since December 2020 against the US dollar. The ongoing crisis in Ukraine weighed heavily on global risk sentiment and saw investors flock to the safe-haven US dollar.
European currencies have been falling fast since the war as investors worry about the impact on the economy and the surge in commodity prices.
While the UK economy is not as exposed as eurozone economies, the pound has been suffering versus the US dollar, but powered ahead against a euro that has been falling against nearly all currencies.
Investors have softened their expectations for monetary policy tightening from central banks including the Bank of England, given the prospect of slowing economic growth. But traders are still pricing in a 25 basis point interest rate hike from the BoE when it meets next week. This could provide some much-needed support for GBP. We have seen it decline over 3.5% in 2 weeks against the US dollar.
Key MoversThe US dollar rose on Monday, as investors weighed the impact on global economic growth. Oil prices hit 14-year highs after the United States and European allies considered banning Russian crude imports.
Europe is the most vulnerable as it imports as much as 40% of its natural gas from Russia and the euro has become increasingly correlated with oil prices – the higher oil prices climb, the more the euro can fall, seems to be the trend we are seeing.
The euro was down 0.7% against the US dollar over concerns that higher energy prices will spark stagflation and hammer the European economy as it tries to recover from the pandemic.
- GBP/USD: 1.3055 - 1.3145 ▼
- GBP/EUR: 1.2005 - 1.2125 ▲
- GBP/AUD: 1.7935 - 1.8085 ▲
- EUR/USD: 1.0805 - 1.0905 ▼