Sterling found support against the dollar in early Europe on Monday and secured a limited recovery with highs as the US currency lost ground, although it was still difficult to gain any significant overall traction. There were fresh concerns over the UK outlook even with a decline in energy prices and there were also doubts whether the Bank of England would meet market expectations surrounding interest rate increases this year. The headline UK unemployment rate declined to 3.9% in the three months to January from 4.1% and there was a further increase in payrolls for February.
No Key Data
Following the latest round of Russian/Ukraine peace talks, there were some hints that progress was being made with Ukraine commenting that Russia had adjusted its stance and the talks will resume on Tuesday. There were some successes in allowing civilians to leave besieged cities. The Euro posted net gains ahead of the European open, but was unable to make a significant challenge against the US dollar. Overall yield spreads moved against the Euro which sapped potential support failing after the European close. Late in Europe there were also reports from US officials that China was aiming to help Russia which sapped potential Euro support.
Key Data
15:15 ECB’s President Lagarde Speech
The US dollar has shown strong resilience and survival for consecutive two months now, especially as the Russian Ukraine crisis escalates. The dollar index has similarly risen to a new ATH nearing 100. The US dollar is beginning the new week strong again and performing strongly over any base currency matched against it. We expect the dollar to continue in its bullish momentum this week or at most remain neutral. This is based on several supportive reasons. Firstly, the Fed policies are currently tightening the dollar value. The Fed is poised to start raising the interest rates and eventually reduce the size of its balance sheet and further set to reconsider raising rates by 50bp. Similarly, there are currently high expectations for the Fed’s terminal rate to be priced above 2.00%, making the US dollar a safe haven for investors for the rest of the year if achieved. Of course, the longer it takes to achieve inflation, the better the greenback’s chances of continuing on its bullish track.
No Key Data