The Dollar continues to show strength in the face of uncertainty surrounding the Russia-Ukraine crisis. Euro lows recovered from the start of last week as commodity prices began to fall and suggestions that diplomatic efforts might end the conflict sooner. But as U.S. inflation rose to 7.9%, the Dollar rallied on speculation of more aggressive action from the FED.
The EUR remains vulnerable, and we anticipate choppy prices with the FED and BoE interest rate hike decisions coming later in the week. Fresh hopes of a diplomatic end to the conflict remain high with another round of talks between Russian and Ukrainian officials and are keeping EUR buoyant.
On Wednesday, we expect the first of as many as six interest rate hikes from the FED this year. Inflation continues upwards and has yet to show signs of peaking, a signal the FED will be looking for before changing policy.
The BoE is also widely expected to increase interest by 0.25pt on Thursday. However, a pause on any lift is also in play due to the ongoing conflict, and no action would see the GBP fall. It’s worth noting that the BoE’s rate-setting committee narrowly agreed on a smaller 0.25pt vs 0.5pt rise last month, so a more considerable surprise hike could also be in play.
Key Calendar Data:
Mon: Eurogroup meeting
Tues: U.K. jobs data, ECB’s President Lagarde speech
Weds: U.S. Retail Sales, Fed Interest Rate Decision & Projections
Thurs: ECB’s President Lagarde speech, BoE Interest Rate Decision, U.S. Jobless Claims,