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US dollar strengthens as risk appetite softens

currency-newsUS dollar strengthens as risk appetite softens
The US dollar rallied on Friday, with the safe-haven currency riding higher on a fresh wave of risk-off trade.

Meanwhile, the pound is muted at the start of this week’s session, with GBP/EUR subdued at €1.1898 and GBP/USD dipping to $1.3151. GBP/CAD is struggling at C$1.6576, while GBP/AUD and GBP/NZD hold steady at AU$1.7783 and NZ$1.9068, respectively.

Looking ahead, in the absence of any high-impact data releases, will we see developments in Ukraine drive currency movements at the start of this week?

What’s been happening?

The US dollar closed last week’s session on stronger footing, with the currency attracting fresh support as a gloomy market mood prevailed.

The deterioration in market sentiment appeared to be linked to the state of peace talks between Ukraine and Russia, with observers expressing concern over a lack of substantial progress, despite officials' upbeat comments earlier in the week.

This disappointment over the slow progress toward a peace agreement took its toll on the euro on Friday.

Further undermining EUR exchange rates was the publication of the Eurozone’s latest trade figures as they reported the bloc’s trade deficit widened dramatically in January.

At the same time, the pound was left muted at the end of last week’s session as GBP investors continued to digest the Bank of England’s (BoE) latest interest rate decision as the bank’s dovish outlook leaves Sterling without any clear support going forward.

What’s coming up?

Turning to this week’s session, it seems safe to assume the situation in Ukraine will continue to influence currency markets.

As the conflict continues to intensify, the EU is reportedly mulling a Russian oil ban. A move which could suppress EUR sentiment today.

The pound could also stumble as the threat of a prolonged conflict will give rise to fresh inflation concerns.
On the other hand, any risk-off flows could extend the upside in the US Dollar.

A speech by Federal Reserve Chair Jerome Powell could also influence USD exchange rates later this afternoon. Should Powell strike a broadly hawkish tone then the ‘greenback’ is likely to strengthen.
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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