News & Analysis


The pound was bogged down by the downturn in risk conditions in yesterday’s session, with the most notable move occurring in GBPEUR due to the greater stagflationary risk in Europe from the recent energy developments. In lieu of any consequential data releases or economic events until BoE Chief Economist Huw Pill speaks on Thursday, the pound’s performance will continue to be dictated by external factors. This morning, as bond yields reflate from yesterday’s dip and European equity futures point to opening lower, the pound sits slightly higher against the dollar as the greenback is offered across the G10. However, price action in GBPUSD remains well within recent ranges.


The euro dropped to fresh one-week lows against the dollar in yesterday’s session amid talks of more sanctions against Russia following the news around war crimes over the weekend. French President Emmanuel Macron stated publicly that the EU should move on increased sanctions on Russian oil and coal as he carefully avoided discussing Russian gas exports. This morning, the pair is little changed, as risk sentiment remains tentative around renewed sanctions from the West, especially after the Treasury halted dollar debt payments from Russian government accounts at US financial institutions. The measures from the US Treasury are aimed at making debt payments more difficult for the Russian government. Despite the actions from the US, there has been no news of increased sanctions from the EU. However, Eurogroup President Paschal Donohoe stated the EU is ready to step up sanctions and will discuss the matter today. With fresh sanctions from the EU on the horizon, EURUSD may struggle to retrace yesterday’s losses today despite the broad offer in the dollar. On the calendar today will be composite PMI indices from Germany, Italy, Spain, France and the eurozone throughout the morning.


The greenback held onto some of its gains overnight after the prospect of new sanctions on Russia weighed on European currencies in Monday’s session. Against other risk-on currencies, like AUD and NZD, the US dollar posted losses as higher commodity prices continued to support these currencies. Overnight, the US Treasury reacted to the weekend’s images of Russian war crimes by halting dollar payments from Russian government accounts at US financial institutions, with an aim to force a debt default from Moscow or to force the government to spend recent export revenues. Today, speeches from Federal Reserve’s Brainard, Daly and Williams will be eyed, especially after Daly’s hawkish comments in the Financial Times following Friday’s nonfarm payrolls print, while markets will also watch the ISM Services index as the main data release of note for today at 15:00 BST.


The Canadian dollar strengthened more than a quarter of a per cent against the greenback on Monday after crude oil prices surged nearly 7% on the day. European condemnation of Russia’s alleged atrocities has turned investors’ focus back to sanctions and how they could further limit Russian energy supplies from hitting the market. Saudi Arabian state producer Saudi Aramco’s decision to raise prices on all customers also would have fuelled the rise in the global price of oil, helping the loonie. Meanwhile, data out of Canada in the form of Q1’s Business Outlook Survey and Canadian Survey of Consumer Expectations turned out to be a disappointment as the interviews were all conducted before Russia invaded Ukraine. Nevertheless, the data did show a rise in inflation expectations that should firm the Bank of Canada Governing Council’s desire to hike rates in a “jumbo” 50bp move. Today, the loonie’s gains continue as upwards price pressures remain in commodity markets, while there is little release in terms of data out of Canada.

FX Elsewhere

The Aussie dollar found substantial support in the decision from the Reserve Bank of Australia decision overnight, despite the RBA choosing to leave policy unchanged. AUDUSD ripped over a full percent higher upon the decision, while AUDJPY saw an even larger spike given the widening yield differential and the yen’s sensitivity to this. The RBA left the cash rate at 0.1%, but scrapped the reference in the statement to remain “patient” on policy, suggesting to markets that the central bank will be more sensitive to incoming inflation and wage data as it gradually prepares for a rate hike. While markets took this as a hawkish signal, part of the move in the Aussie dollar was also related to overall commodity moves, with currencies like NOK and CAD also rallying against the greenback in the same time frame.



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