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Euro stumbles amid reports of possible EU restrictions on Russian oil and gas

currency-newsEuro stumbles amid reports of possible EU restrictions on Russian oil and gas
The euro remained on the defensive on Tuesday, amidst fresh concerns over the possible disruption of European energy supplies due to events in Ukraine.

Meanwhile, the pound is on the defensive so far this morning, with GBP/EUR subdued at €1.1970 and GBP/USD retreating to $1.3285. GBP/CAD has fallen to C$1.6913, while GBP/AUD and GBP/NZD have stumbled to AU$1.8322 and NZ$1.9652, respectively.

Looking ahead, Russia and Ukraine are scheduled to hold a second round of peace talks today, could this help to rebuild market risk appetite?
 

What’s been happening?

The euro trended lower again through yesterday’s trading session, with the single currency being dented by reports the EU may move to restrict Russian oil and gas imports, in spite of the potential impact on local energy supplies.

This followed news that Russia stepped up its offensive in Ukraine, with its forces striking more civilian targets.
The escalation of violence in Ukraine bolstered demand for the safe-haven ‘greenback’ again on Tuesday.

Reinforcing the upside in USD exchange rates was the latest ISM manufacturing PMI, which reported a better-than-expected acceleration of US factory sector growth last month.

At the same time, the pound was left mostly muted yesterday as a stronger-than-expected Manufacturing PMI was unable to offset the gloomy market mood.
 

What’s coming up?

Turning to today’s session, we will likely see movement in the currency market continue to revolve around events in Ukraine. Could a second round of peace talks between Russia and Ukraine limit safe-haven flows?

Otherwise the focus today will likely be on the start of Federal Reserve Chair, Jerome Powell’s two-day testimony in front of Congress.

Powell will likely be grilled on the US central bank’s monetary policy and how it plans to rein in inflation. Expect the US dollar to face some headwinds if he remains cautious about the Fed’s future monetary tightening in light of events in Ukraine.

In the meantime, the Eurozone’s consumer price index is expected to report inflation in the bloc rocketed up to a new record high last month. But will any upside in the euro be capped by the ongoing conflict in Ukraine?

Finally in the absence of any notable data releases, the pound may struggled to find any strong directional bias today.
 
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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