News & Analysis

Market volatility was elevated this week following the dovish surprise by the Bank of Canada, simmering tensions between Russia and Ukraine, and hawkish commentary by Chair Powell following the Fed’s January policy announcement. Geopolitical tensions took centre stage at the start of the week ahead of key negotiations in Paris, but a statement by the Russian Foreign Ministry outlining how a war in Ukraine was “unthinkable” helped soothe market concerns from Wednesday onwards. The source of volatility then shifted from geopolitics to the rate space, with most of the cross-asset impact stemming from Fed Chair Powell’s hawkish comment on rates and the labour market. US front-end yields rose in the aftermath and FX markets favoured the dollar as a whole, sending the DXY index to new cycle highs above the 97 handle. Amid this environment, all eyes sat on EURUSD and EURCHF as the single currency was hampered by the rise in regional risk, and the impacts geopolitical spillovers could have on domestic energy inflation, along with rising US rates.

Next week, with the Bank of England and European Central Bank set to release policy, rate differentials will sit front of mind yet again, while North American labour market data should provide more colour on the projected rate paths for policy rates as the Omicron impact becomes measurable.

You can read the Week Ahead in full here:

DOWNLOAD THE FULL REPORT

 

Authors: 
Simon Harvey, Head of FX Analysis
Ima Sammani, FX Market Analyst

 

 

 

Disclaimer
This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.