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EUR/USD exchange rate plunges to $0.97 amid Ukraine concerns

currency-newsEUR/USD exchange rate plunges to $0.97 amid Ukraine concerns
The US dollar raced higher on Friday as fears of a possible escalation in the Russia-Ukraine war spooked investors and bolstered USD demand.

The pound opens this week on the front foot, with GBP/EUR climbing to €1.1420, while GBP/USD rallies to $1.1208. GBP/CAD is flat at C$1.5412, while GBP/AUD and GBP/NZD are subdued at AU$1.7393 and NZ$1.9854, respectively.

Coming up, will a robust US PMI release extend the US dollar’s gains today?
 

What’s been happening?


The US dollar surged at the end of last week. Investors favoured the safe-haven currency as market sentiment was underminded by concerns over Vladmir Putin's illegal annexation of Ukrainian territories.

USD exchange rates then relinquished some ground in the afternoon, despite the core PCE price index – The Federal Reserve’s preferred measure for inflation, printing above expectations in August.

The euro was placed on the back foot on Friday. EUR investors were spooked by Putin’s move to annex parts of Ukraine, amid fears it will lead to an escalation of the conflict, which has already placed considerable pressure on the Eurozone economy.

This overshadowed the publication of the Eurozone’s consumer price index, which reported inflation in the bloc soared to a new record high of 10% in September.

Meanwhile, the pound initially found support with the publication of the UK’s latest GDP release. Finalised figures for the second quarter saw growth revised up from –0.1% to 0.2%, quashing fears the UK is already in a recession.

However, Sterling sentiment quickly slumped following the news that Liz Truss and Chancellor Kwasi Kwarteng will not publish new forecasts from the Office for Budget Responsibility’s (OBR) until the end of November.


What’s coming up?

The highlight of today’s data calendar is likely to be the latest ISM manufacturing PMI.

September’s PMI is expected to report that the US sector continued to expand, albeit at a modest pace at the end of the third quarter. Potentially bolstering the appeal of the US dollar later this afternoon.

The focus for EUR investors will be the Eurozone’s own manufacturing PMI release which could influence EUR exchange rates this morning’ if September’s finalised figures deviate from the preliminary publication.

In the meantime, the pound is rallying this morning, following the news that Kwarteng is reversing his plans for higher income tax cuts. Kwarteng is also set to speak at the Conservative party conference later this afternoon. Could further U-turns from the Chancellor provide additional support for Sterling?
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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