It’s a busy week of speeches and economic data but the ongoing war remains the biggest influence on all currency markets this week.
As the prolonged Russia-Ukraine conflict continues to keep investors on edge, USD has remained strong and been further supported with the FED’s first interest rate hike last week. We could see a further six more hikes this year as the USA grapples with rising inflation bolstered by the impact of the conflict on commodities and trade. All in all, DOLLAR strength looks set to continue in the short and mid-term.
The EURO bounced back from two-year lows at the start of the month but faces layers of resistance in its climb back towards 1.12 mark vs USD. The progress of peace talk will be key for EURO strength over the coming weeks and although reports seem positive the risk still remains clear for investors. With a potential energy shortage and recession on the horizon, any breakdown of peace talks may send EURO back towards its early March lows.
STERLING has struggled to gain momentum despite last week’s BoE decision to lift interest rates to its pre-coronavirus crisis level. Surging energy prices are pushing inflation higher and squeezing consumers’ pockets -effectively cooling the economy. This brings into question the need for raising interest rates again with the market now anticipating only 1.25% vs 2% rate by the end of 2022. This may signal a bearish outlook for GBP and many will be looking for direction with The UK government’s budget statement and CPI figures this week.
Monday
USD Fed’s Chair Powell speech
Tuesday
EUR ECB’s President Lagarde speech
Wednesday
GBP Consumer Price Index (YoY)(Feb)
GBP Budget Statment
USD Fed’s Chair Powell speech
Thursday
EUR Markit PMI Composite(Mar) PREL
GBP Markit Services PMI(Mar) PREL
USD Durable Goods Orders(Feb)
USD Nondefense Capital Goods Orders ex Aircraft(Feb)