Home > Resource Hub > Daily Market News > Conflict Continues To Dominate As Sanctions Eyed

Conflict Continues To Dominate As Sanctions Eyed

Conflict Continues To Dominate As Sanctions Eyed

European markets look somewhat firmer ahead of the weekend, allowing the British Pound and Euro to recover overnight and recoup some lost ground against the US Dollar.

The US currency surged against both on the first day of Russia’s invasion of Ukraine, which enters its second day, amidst a classic demand for more liquid, low-yielding and safe haven currencies. Investors ran for safety amidst the geopolitical fallout, demanding Dollars, Yen, Swiss Francs and gold. 

There has been a lot of news about sanctions against Russia. These sanctions are mostly about sending or receiving money to certain Russian banks, businesses and individuals. Financial institutions, including Currency UK, have a legal obligation to follow these rulings and so the intention is to strangle economic activities. 

The Euro and other European currencies were under pressure as western countries imposed another round of sanctions on Russian companies and individuals. However, these sanctions are a legal measure and do not physically prevent money from moving to and from these sanctioned entities.

The debate that took hold yesterday was if Russia should be disconnected from the SWIFT payment system. This is effectively the ‘payment internet’, the same system that we send many of your payments on. Disconnecting Russia from this system would be a physical sanction and would likely be substantially more effective than a legal sanction. The Ukrainians are pushing for this to happen but the Europeans (and US) know that this sanction is the one that could force Russia to turn off the gas supplies to Europe

In level terms, EUR/USD opens this morning back up at 1.12, GBP/USD near the 1.34 mark whilst the GBP/EUR remains within the 1.19-1.2050 trading range.

Expect more headline driven and volatile market conditions over the coming hours.

Share this case study
Set yourself up in minutes, make payments the same day: it’s free, easy and without obligation.