Cromwell FX Market View Ukraine in Focus

It seems not a week goes by without some level of event driven volatility. Late in the week rumours of Russia /  Ukraine escalation saw Euro move lower. Oil surged to a new 7 year high and Equities lost ground. In the background we still see the Fed tightening rates ahead.

Investors were concerned that a Russian invasion of Ukraine could begin any time. US urged their citizens to leave Ukraine right away, and that was followed by a wave of other nations including the UK, Japan, Latvia, Norway, Netherlands, Australia and New Zealand.

Last week saw higher than expected US CPI which at 7.5% surpassed market expectation.  Different from the previous 2015-2018 rate-hike cycle, inflation is much higher this time due to unprecedented monetary and fiscal stimulus put in place to shore up growth amid the Covid-19 pandemic  Labour market conditions have improved tremendously in recent months, with the latest nonfarm payrolls report showing a robust increase in job numbers and solid wage growth.

Euro was the worst performer as the USD gained momentum and the continued risk of Russia/Ukraine weighed heavily on the single currency

The week ahead is looking at the geopolitical situation in Ukraine. Should Russia pull back we will see the potential for some level of risk on, but don’t forget inflation and central bank tightening is still very much on the horizon.