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US dollar strengthened by Ukraine crisis

currency-newsUS dollar strengthened by Ukraine crisis
The US dollar struck higher on Monday as market jitters over the situation in Ukraine prompted investors to favour safe-haven assets.

Meanwhile, the pound is trading in a narrow range so far this morning, with GBP/EUR muted at €1.1958 and GBP/USD stable at $1.3551. GBP/CAD is rangebound at C$1.7241, while GBP/AUD and GBP/NZD hold steady at AU$1.8983 and NZ$2.0409, respectively.

Looking ahead, with the Ukraine crisis continuing to dominate headlines, market risk appetite is susceptible to weaken further, potentially extending the US dollar’s upside momentum.


What’s been happening?

The US dollar came out on top at the start of this week, as a bearish market mood bolstered demand for the safe-haven currency.

This was prompted by heightened geopolitical tensions amidst growing fears of imminent Russian military action in Ukraine, after most western governments urged their citizens to leave the country.

Although Russian Foreign Minister Sergey Lavrov helped to minimise the fallout by suggesting that talks regarding Ukraine had not been exhausted, fears of an invasion still dominated markets.

The prospect of war breaking out on the EU’s doorstep unsurprisingly left the euro on the back foot at the start of this week, something which was not helped by some more dovish comments from European Central Bank (ECB) President Christine Lagarde.

At the same time, the pound wavered during yesterday’s session amidst fresh Brexit uncertainty, after DUP leader Sir Jeffrey Donaldson suggested ‘very little progress’ has been made in regards to the renegotiation of the Northern Ireland protocol.


What’s coming up?

Looking ahead, we may see the US dollar maintain its upward momentum today as fears over a potential conflict in eastern Europe show no sign of abating.

In the meantime, this morning saw the publication of the UK’s latest jobs report.

December’s release reported domestic unemployment held at 4.1% in December as expected, while the accompanying average earning figures showed wage growth unexpectedly accelerated from 4.2% to 4.3% over the same period.

This might lend some support to the pound today as the surprise uptick in wage growth could help to ease concerns over the UK’s cost-of-living crisis.

Meanwhile, the focus for EUR investors this morning will be on Germany’s latest ZEW survey. Will an improvement in economic sentiment in the Eurozone’s largest economy help to buoy the euro 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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