Ukraine conflict continues to impact markets
Last week the volatile trading conditions continued on markets as participants reacted to developments in Ukraine. The initial reaction to Russia’s full scale invasion of the country was one of heightened risk aversion with safe haven currencies such as the dollar and yen in demand amid a flight to safety. At the same, energy prices continued to rise, including oil increasing to above $100 p/b on the back of supply concerns. Risk appetite improved somewhat heading into the weekend as the economic sanctions announced last week were not as severe as traders had expected and so there was some reversal of the moves arising from the safe haven scramble
Numbers wise, EUR/USD finished the week back above $1.12 from its low of $1.11, having started last Monday in the upper half of $1.13-1.14. GBP/USD also recovered somewhat, regaining the $1.33 level, but similar to the euro, was still weaker on the week versus the dollar. EUR/GBP action was much less eventful with the pair confined to a narrow trading range within the 83-84p band last week.
Overnight and into this morning, we have seen markets back in risk-off mode following the announcements of stricter sanctions against Russia, including to their central banks with the Russian rouble falling by around 30%. Renewed safe haven demand has resulted in EUR/USD falling back below $1.12.
As we look to the day ahead, Ukraine related developments will remain a source of volatility for markets. Once again, our thoughts at Currency UK go beyond the financial implications, and are with those affected by the crisis.