28th February - Weekly FX Update

Top Currency Pairs Monday 28th February 9:00 UTC GBP/USD: 1.33638 (Last Week: 1.36359) EUR/USD: 1.11765 (Last Week: 1.13600) GBP/EUR: 1.19570 (Last Week: 1.19936)

Market News

Pound Sterling The GBP/EUR exchange rate was lower last week after Russia launched a full-scale invasion into Ukraine, while the GBP/USD exchange rate experienced its worst day since March 2020 as investors flocked to the safe-haven currency. The Bank of England now face an extremely tough decision on handling the UK's economy, as although inflationary pressures are likely to spiral even further out of control, war could also hinder economic growth. They will be weary of hiking interest rates once again in case doing so could add to economic downturn. The BoE saw inflation reaching a peak of 7.25% this year, which may now be tested with recent market developments. Nonetheless, traders are expecting lower rate expectations, and unless imposed sanctions begin to restrict Europe, the Pound will likely fail to make any further gains with lessened expectations and significant headline risk.

Euro The ECB are watching the Ukraine-Russia crisis very closely, and have noted they are ready to take whatever actions necessary to ensure financial stability. President Christine Lagarde and other members of the ECB have urged haste on regulating Cryptocurrency in wake of these Russian SWIFT sanctions to close a potential loophole around banking and international payments. The week ahead will see inflation and employment numbers for Germany, however all major headlines will focus on the conflict. Germany have stepped up in an attempt to reduce its reliance upon Russian gas, after Chancellor Olaf Scholz has said they will build two gas terminals for LNG shipments. This would be great news for the Euro which despite falling against the Dollar, has been holding up against the Pound well.

U.S. Dollar The Dollar gained considerable strength last week against other major currencies after Russia declared war on Ukraine. Against the Pound, the exchange rate fell to a low of 1.32802, and against the Euro, to a low of 1.11216 after investors have taken shelter in the Dollar. Initially, this is not expected to derail the Federal Reserve's plans to hike rates in March as they are set to aggressively tackle inflation last seen decades ago. As long as it stays this way, it is expected the Dollar will continue to profit from such a volatile political environment. Moreover, this morning, the Russian Ruble fell below 1 cent against the US Dollar after SWIFT sanctions were imposed, as the stock market failed to open amid a crippling Russian economy.

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