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Euro Falters as Ukraine Peace Process in Doubt, US Dollar Bolstered by Hawkish Fed

The Euro came under pressure again this week as events in Ukraine looked to overshadow Ukraine-Russia peace talks. 

At the same time, the US Dollar was ultimately able to rally this week, amidst some hawkish signals from the Federal Reserve. 

Pound Fluctuates on Cost of Living Concerns 

GBP/EUR – Up one cent on the week’s opening levels 

GBP/USD – Down one cent on the week’s opening levels 

The Pound trade erratically this week, with renewed concerns over the situation in Ukraine as well as fresh fears over the impact of the UK’s rising cost of living taking their toll on the currency.  

On the other hand, an upwardly revised services PMI and a technical correction were able to lend some support to Sterling. 

The UK’s latest jobs report and consumer price index will be closely watched by GBP investors next week. Any signs that household budgets could be squeezed further are likely to weigh on the Pound. 

Euro Stumbles amid Mounting Ukraine Concerns 

EUR/GBP – Down one pence on the week’s opening levels 

EUR/USD – Down two cents on the week’s opening levels 

The Euro stumbled out of the gate this week as evidence emerge of atrocities committed by Russian troops in Ukraine, which cast fresh doubts over the peace process.  

The minutes from the European Central Bank’s (ECB) March policy meeting then led to a short-lived rally in the single currency after they revealed a large number of policymakers believe the bank should expedite its monetary tightening in light of surging inflation. 

With this in mind EUR investors will be eager to hear the ECB’s latest forward guidance when it concludes its April policy meeting later this week. Will a more hawkish outlook from the bank help to bolster the Euro? 

US Dollar Underpinned by Hawkish Fed 

USD/GBP – Unchanged on the week’s opening levels  

USD/EUR – Up two cents on the week’s opening levels  

The US Dollar initially faltered this week, with the currency being pressured the inversion of the US yield curve and fears this may be a signal the US will slip into a recession in the next couple of years.  

However, the ‘Greenback’ was able to bounce back later in the session as the latest FOMC minutes and hawkish comments from Federal Reserve policymakers reinforced expectations the Fed will deliver a half-percent increase in interest rates next month. 

Centre stage next week will be the US consumer price index. Will another surge in domestic inflation push the US Dollar higher? 

Australian Dollar Spikes on Hawkish RBA  

AUD/GBP – Unchanged on the week’s opening levels 

AUD/USD – Unchanged on the week’s opening levels 

The Australian Dollar stormed higher at the start of this week, with AUD exchange rates hitting new multi-month highs as the Reserve Bank of Australia’s (RBA) latest policy statement proved to be a lot more hawkish than expected. 

However the ‘Aussie’ was then forced to relinquish most of these gains later in the week amidst fresh concerns over China’s Covid resurgence. 

The publication of Australia’s latest jobs report will no doubt be the focus for AUD investors next week. Will another drop in unemployment help to propel the Australian Dollar even higher? 

Key Data  

Apr 12 AUD Business Confidence (Mar) 

Apr 12 GBP Unemployment Rate (Feb) 

Apr 12 GBP Wage Growth (Feb)  

Apr 12 EUR German Inflation Rate (Mar) 

Apr 12 EUR German ZEW Economic Sentiment (Apr)  

Apr 12 USD Inflation Rate (Mar)  

Apr 13 AUD Consumer Confidence (Apr) 

Apr 13 GBP Inflation Rate (Mar)  

Apr 14 AUD Unemployment Rate (Mar) 

Apr 14 EUR ECB Interest Rate Decision  

Apr 14 USD Retail Sales (Mar) 

Apr 14 USD Consumer Sentiment (Apr)