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Euro slumps amid worries of fallout from sanctions on Russia

currency-newsEuro slumps amid worries of fallout from sanctions on Russia
The euro tumbled on Monday as EUR investors expressed concerns over the potential knock on effects from new Western sanctions on Russia.

Meanwhile trade in the pound is subdued so far this morning, with GBP/EUR muted at €1.1955 and GBP/USD flat at $1.3421. GBP/CAD is rangebound at C$1.6990, while GBP/AUD and GBP/NZD slip to AU$1.8422 and NZ$1.9767, respectively.

As Russia’s war with Ukraine rages on, will we witness more currency volatility today?

What’s been happening?

The euro slumped at the start of this week as market raised concerns about the possible economic impact of the West’s sanctions on Russia, especially if it prompts Moscow to disrupt European energy supplies.

Further weighing on EUR sentiment was speculation that the next interest rate hike from the European Central Bank (ECB) could be delayed beyond 2022.

The US dollar exploded out of the gates this week, with investors initially flocking to the safe-haven currency as they reacted to the sanctions imposed by the West over the weekend.

However, a subsequent recovery in risk appetite as Russia and Ukraine held peace talks reversed a good portion of these gains through the second half of the European trading session.

Finally, the pound mostly trading sideways on Monday as the currency lacked any strong directional bias of its own.

What’s coming up?

Looking ahead, it seems safe to assume the situation in Ukraine will continue to drive currency markets volatility today, with the euro likely to remain vulnerable to any escalation of violence.

The euro may also be influenced by the publication of Germany’s consumer price index. February’s preliminary figures are expected to report inflation in the Eurozone’s largest economy continued to climb.

In terms of data the focus for USD investors will be on the latest ISM manufacturing PMI, where an expected expansion of the US factory sector this month may reflect positively on the US dollar.

Finally GBP investors will be keeping a close eye on a couple of speeches from Bank of England (BoE) policymakers later this evening. A more cautious outlook from the BoE’s Michael Saunders and Catherine L. Mann might undermine the pound.
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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