US dollar skyrockets as Russia begins invasion of Ukraine

The US dollar soared overnight on Wednesday, as investors flocked to safe-haven assets as markets were rocked by Russia’s ‘full-scale invasion’ of Ukraine.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR flat at €1.1989 and GBP/USD slumping to $1.3611. GBP/CAD is rangebound at C$1.7261, while GBP/AUD and GBP/NZD tick up to AU$1.8781 and NZ$2.0065, respectively.

Looking ahead, will an upwardly revised US GDP reading help to buoy USD exchange rates today?

What’s been happening?

The US dollar struck lower through yesterday’s European trading session, with risk-on flows resulting in investors shunning the currency.

However, there was a dramatic reversal in risk sentiment overnight, with the US dollar surging as Russia’s invasion of Ukraine rattled markets.

The negative correlation between the US dollar and the euro allowed the latter to edge higher on Wednesday, although the single currency’s gains were capped by concerns war could still break out in Eastern Europe.

At the same time, the pound struggled to attract support as Bank of England (BoE) Governor Andrew Bailey testified before Parliament’s Treasury Committee as part of the bank’s quarterly Monetary Policy Report.

While Bailey suggested inflation risks remain tilted to the upside he cautioned investors in in regards to aggressive betting on future interest rate hikes.

What’s coming up?

Turning to today’s session, there’s no doubt that the situation in Ukraine will dominate market movement, with the crisis likely to continue to act as a key source of volatility.

Elsewhere, the most high impact release in today’s data calendar will be on the latest US GDP figures. Will an upwards revision to growth in the last quarter of 2021 help to buoy the US dollar?

Elsewhere we may see additional comments by BoE Governor Bailey and policymaker Huw Pill influence the pound today.

In the meantime, a modest fall in the Confederation of British Industry’s latest distributive trades index could exert some pressure on Sterling this morning.

Finally, EUR investors may look to a series of speech by European Central Bank (ECB) policymakers for fresh impetus today. Will a cautious outlook push the euro lower?