G7 forex market saw exceptional volatility as Russia’s incursion into Ukraine dominated forex news events this week. As traders followed the war, currency pairs and sentiment oscillated.
Earlier in the week, risk-off went to the highest levels as Russia invaded Ukraine. But risk-on trades returned in the second half of the week as the western world responded. EU, UK, NATO, and US declared severe sanctions against Russia. Amidst the war, risk assets emerged robustly. And as expected, the dollar’s demand soared.
Overall, market sentiments ended net risk-on, supporting Aussie and Kiwi dollars to be the week’s best performing g7 currencies. European majors suffered heavy losses, with the British pound’s worst hit.
With that, let’s look at the fundamentals that drove the market.
The Fundamentals
This week Russia and Ukraine war overshadowed other fundamentals causing risk-off moods for most of the week.
Russia/Ukraine War
The geopolitical situation remained tense as Russia rained terror on Ukraine throughout the week. Missiles shelled Kyiv killing civilians and damaging buildings. Russia also unleashed cyberattacks on Ukrainian banks and government websites.
On Thursday, Putin issued executive order to invade Ukraine. Immediately, risk assets, including crypto, equities, and bond, took a nosedive. But oil, gold, and US dollar soared higher.
News that Russian troops had invaded a part of Ukraine drove down risk assets, triggering the biggest daily selloff on Thursday. Risk-off sentiments shot over the roof, causing chaos and panic in Russia’s financial markets. Market stocks tumbled 45 percent.
And rubble plummeted to a record low of 89.60 against the US dollar. Western allies responded swiftly against Russia’s aggressive behavior with stringent sanctions. UK, US, EU, and NATO imposed harsh sanctions on Russian officials and economies. President Putin and foreign minister Lavrov were not spared, either.
The sanctions aim to:
- cripple Russia’s economy and
- severe its diplomatic relations with the international community.
Immediately after the announcement of the sanctions risk assets soared, and safe-haven currencies tumbled. The war caused global supply chain disruptions. It also interferes with the supply of oil and natural gas to Europe.
Economic Matters
Moving away from the wars to economic matters, it was relatively quiet. The central bank of New Zealand hiked interest rates to one percent from 0.75 percent on Wednesday.
A few G7 nations posted economic data but could not match the effect of the war.
Oil Price Analysis Forecast
As usual, oil impacted the market. WTI crude oil prices oscillated over the week, spiking to a high of 102.19 dollars per barrel but retreated to 93.35 at the end of the week. The prices scratched the 100 dollars per barrel threshold level for the first time since 2014.
Oil price analysis forecast indicates the prices will continue to rise in the near term as Russia/ Ukraine crisis escalates. The spiking oil price will likely drive global inflation higher and for longer.
G7 Economic Review and Fundamental Analysis
Table: g7 currencies performance summary
| Currency pair | 19th Feb 2022 | 25th Feb 2022 | Average price | Percentage change | Remarks |
| USD | 96.020 | 96.619 | 95.391 | 0.622 | increase |
| GBPUSD | 1.3598 | 1.3406 | 1.3500 | 1.3613 | drop |
| EURUSD | 1.1310 | 1.1267 | 1.1280 | 0.4770 | drop |
| USDCHF | 0.9156 | 0.9250 | 0.9212 | 0.3798 | increase |
| USDJPY | 114.74 | 115.56 | 115.17 | 0.49 | increase |
| USDCAD | 1.2751 | 1.2705 | 1.2752 | 0.3451 | drop |
| AUDUSD | 0.7190 | 0.7232 | 0.7207 | 1.2515 | increase |
| NZDUSD | 0.6698 | 0.6734 | 0.6725 | 1.3809 | increase |
While several fundamentals influenced forex news events this week, geopolitics played the most significant role. Russia’s onslaught of Kyiv weighed heavily on riskier assets but increased Dollar demands.
Here is how the g7 currencies performed.
Traders Banked on USD Strength
As Russia brutally pounded Ukraine, traders rushed to the dollar, driving its value upward by 0.55 percent to close the week at 96.615. During the previous week, the usd strength increased dismally by 0.02 percent.
This week, consumer confidence and private sector performance influenced forex news events. While private-sector activity rose to 56.7 from 51.2, consumer confidence tumbled to 61.7 from 67.2. Later in the week, inflation, jobless claims, core durable goods, and personal spending uplifted the greenback.
Personal spending rose by 2.1 percent, and core durable goods increased by less than one percent. Inflation rate ticked upwards, with consumer price index jumping to 5.2 percent from 4.9 percent.
European Majors: Forex News Events This Week
European majors were severely affected by the geopolitical concerns pitting Russia against Ukraine.
Exchange Rate Forecast Pound to Dollar
The pound closed the week badly. It lost 1.14 percent to 1.3409. In the previous week, it had risen by 0.18 percent. Early in the week, Prelim private sector influenced exchange rate forecast pound to dollar.
Prelim reports indicate the UKs service index rose to 60.8 from 54.1. And manufacturing sector activity remained unchanged, pushing the composite index to 60.2 from 54.2.
Finally, Prime Minister Boris Johnson dropped the remaining coronavirus restrictions in Britain on Monday. This includes self-isolation after testing positive, free administration of rapid tests, and contact tracing.
Euro Dollar Rate Forecast
The euro continued with its weekly losses. This week, it fell by 0.72 percent to 1.1268 against the dollar. In the other week, it had weakened by a quarter percent. With all headlines trailing Russia’s invasion of Ukraine, economic updates had little impact on forex news events this week.
But still, early in the week, private sector data for Germany, France, and the eurozone took center stage. The private sector data supported the euro dollar rate forecast, with the eurozone’s composite index jumping to 55.8 from 52.3.
The eurozone released more economic data mid-week, which had mixed reactions. In Germany, the business climate index edged higher to 98.9 from 96.0, and the consumer climate index declined to -8.1 from -6.7. And the fourth-quarter economy shrank by 0.3 percent, better than the first estimate of 0.7 percent contraction.
The inflation numbers released on Friday had a muted effect on the euro as traders watched the Russian invasion of Ukraine.
Swiss Franc vs USD
Swiss franc depreciated by 0.3798 percent to 0.9250 after gaining 0.4413 previously. Switzerland did not post economic data; ultimately, geopolitical tensions impacted swiss franc vs usd exchange rate.
Also, Switzerland’s nasty habit of looking aside money laundering and financial crimes weighed on its currency. The EU and US have always accused Switzerland of money laundering and financial crimes. And over the week, they renewed calls to categorize Switzerland as a high-risk country for financial crimes and money laundering.
US Dollar Against Canadian
The Canadian dollar reversed previous losses and gained 0.19 percent against the dollar, reaching. Before this, the Loonie had depreciated by 0.12 percent. Canada had a quiet economic calendar leaving the performance us dollar against Canadian currency to market risk sentiment and crude oil prices.
Monthly manufacturing sales improved by 1.3 percent, but employment records disappointed. Employment reduced by 200 thousand pushing the unemployment rate to a staggering 6,5 percent from 0.5 percent. Despite the poor economic data, Canadian dollar gained value this week thanks to rising Brent crude oil prices.
Forex News Events This Week In Asia-Pacific Region
It was a mixed reaction to the geopolitical tensions across the Asia-Pacific region. Both Aussie and kiwi dollars appreciated riding on positive sentiments resulting from tougher sanctions targeting Russian officials and close ties. Haven yen could not much the strength of king dollar, which always thrives in the risky market environment.
Aud Currency Vs Usd
Aussie dollar rallied by 1.25 percent to take the second slot after the New Zealand dollar. Previously, the aud currency vs usd gained 0.5326 percent. On the economic front, wage growth, construction activity, and private new CAPEX data influenced Australias forex news events this week.
In the fourth quarter, wages grew by 0.7 percent after rising by 0.6 percent previously. While the wage growth was favorable to the Australian dollar, private new CAPEX data and construction work activity slightly impacted it.
NZD Fx Rate
Kiwi Dollar was the biggest mover in forex news events this week. It gained 1.38 percent to 0.6743, emerging as the week’s winner. It also topped the previous week, having rallied by 0.78233 percent.
Earlier in the week, all was quiet in the economic calendar of New Zealand. Mid-week, Reserve Bank of New Zealand (RBNZ) monetary decisions uplifted nzd fx rate. As expected, the bank increased lending rates by twenty-five basis points to one percent.
Trade data and retail sales figures, though mixed, came into focus. After a series of disappointments, retail sales finally recovered in the fourth quarter. On the other side, the trade deficit for New Zealand expanded.
Arguably, the rebound in retail sales data uplifted the kiwi currency on Friday.
USD JPY Fx Rate
Haven yen weakened over the week as traders ran to the safety of king dollar. The yen fell by 0.11 percent to 115.550. Inflation and private sector data uplifted usd jpy fx rates on the economic front.
Service sector contraction significantly weighed against the yen. Financial updates indicate the services fell to 42.7 from 47.6. Similarly, slowed manufacturing sector activity pressured the yen.
Later in the week, inflation data failed to move the dial. The inflation rate in japan climbed slightly to 0.5 percent from 0,2 percent.
Week Ahead
As we move to another month, we expect the following to drive the market
- Economical Updates
- Oil Prices
- Russia/Ukraine war
The Russian incursion into Ukraine triggered a frenzy in forex news events this week. Will the war spill over into the coming week or will Putin cave into sanctions pressure. Fancy more? Don’t miss our subsequent analysis.
Have a great week and as always, stay safe.
