Pound (GBP) Plunges amid Market Selloff
The Pound (GBP) weakened sharply yesterday, amid the sharp market selloff triggered by Russia’s invasion of Ukraine. Sterling crashed nearly 2% to a two-month low against the US Dollar (USD) in its biggest daily decline since March 2020.
Markets reducing expectations for aggressive rate hikes from the Bank of England (BoE) at its coming policy meetings also weakened Sterling. BoE Chief Economist Huw Pill echoed recent comments from other policymakers to bring down inflation in a ‘measured way’.
Developments in the Ukraine crisis will dominate GBP movement going into the weekend, with markets adjusting to Russia’s military aggression and economic sanctions against the country.
Euro (EUR) Slides as War Breaks Out in Europe
The Euro (EUR) tumbled through Thursday’s session as Russia’s aggression spooked markets due to the threat to trade, economic activity, and inflationary pressure in the EU.
In light of oil prices surging and gas prices jumping 40%, disruption to the Eurozone’s growth outlook and the European Central Bank’s (ECB) policy path to bring down soaring inflation also weighed on the Euro. Investors shifted expectations for when the ECB will likely end its bond-buying programme and raise interest rates.
Following yesterday’s ECB meeting in Paris, comments from President Christine Lagarde today on the Bank’s response to Russia’s invasion of Ukraine will likely be a key driver in EUR movement.
US Dollar (USD) Soars as Ukraine Crisis Drives Safe-Haven Demand
The US Dollar surged yesterday, posting significant gains across the board as investors fled to the safe-haven currency amid turmoil in markets.
Meanwhile, investors repricing expectations for how the conflict may cause the Federal Reserve to slow tightening of its monetary policy also drove USD movement, although Fed policymaker Christopher Waller said he would support a half-point rate hike next month.
US durable goods orders and PCE price index data released today would usually drive significant movement in the US Dollar, but the war in Ukraine may overshadow all other events and provide the US Dollar with continued safe-haven support.
Canadian Dollar (CAD) Underpinned by Rising Oil Prices
The Canadian Dollar (CAD) strengthened significantly against a basket of currencies during yesterday’s session, but slid against the soaring US Dollar in risk-off trade.
As Russia’s invasion of Ukraine pushed oil prices sharply higher due to supply disruption fears, the oil-sensitive ‘Loonie’ made gains as WTI crude prices rose to $96 a barrel.
Oil prices continuing to rise going into the weekend as Russia’s military offensive into Ukraine continues will likely underpin support for the Canadian Dollar against many of its currency peers.
Australian Dollar (AUD) Boosted by High Commodity Prices
The Australian Dollar (AUD) pushed higher overnight as rising commodity market prices underpinned support for the ‘Aussie’.
Prices of metals and coal, Australia’s main exports, rose to provide support and offset risk-off trade, which usually weigh on the risk-sensitive Australian Dollar.
New Zealand Dollar (NZD) Bolstered by Hawkish RBNZ
The New Zealand Dollar (NZD) also firmed overnight, benefitting from its positive correlation with the Australian Dollar as well as hawkish comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr.
Better-than-expected New Zealand retail sales for the fourth quarter also supported NZD exchange rates.
Data Releases
10:00 EUR Economic Sentiment (Feb)
11:15 EUR ECB President Lagarde Speech
13:30 USD PCE Price Index (Jan)
13:30 USD Durable Goods Orders (Jan)
15:00 USD Michigan Consumer Sentiment Final (Feb)