Once more, the Ukraine crisis gyrated recent currency exchange rates. Moreover, repercussions of the situation are felt across the globe as commodities, gas, and oil, vital economic drivers, continue to soar.
Aside from Ukraine developments, traders also focused on sanctions against Russia, global rising inflation fears, and rate hikes expectations.
Inflationary pressure and safe-haven currency demands drove the market, but geopolitics played a significant role. Russia’s sustained shelling of Ukraine weighed on high-risk assets. And hopes of ceasefire negotiations alleviated some market angst on Wednesday.
At the G7 forex market, euro emerged as the winner. US and Canadian dollars took second and third spots, respectively. Meanwhile, Japan’s yen took the bottom slot, New Zealand and Australian dollars.
Fundamentals
More sanctions and fears of the Ukraine crisis pushed commodity prices and inflation higher.
Russia Continues To Annihilate Ukraine
Russia continues to shell Ukraine, and retaliatory sanctions against Russia reverberated through recent currency exchange rates. On Wednesday, we witnessed market optimism as a ceasefire was announced to allow the evacuation of refugees.
Diplomatic negotiations between Russia and Ukraine also added to the optimism. The ceasefire and diplomatic talks correlated with the fall in commodity prices and safe-have flows. But amidst the high hopes for peace, the ceasefire meeting on Thursday failed to yield positive results. As a result, commodity and safe haven prices rebounded.
On Tuesday, European Union announced it aims to reduce reliance on Russian gas by eighty percent by the end of the year.
The crippling response, support
In response to Russia’s aggressive behavior against Ukraine, the US, UK, NATO, Japan, and the EU inflicted more sanctions on Russia. Wednesday, US government imposed an oil and gas embargo on Russia. Immediately after the announcement, oil prices surged to 128 dollars per barrel.
In addition, the US pledged to support Ukraine. The US released funds to maintain Ukraine’s government and assist refugees. Multinational businesses like coca-cola, Upwork, Starbucks, Pepsi, and MacDonalds pulled out of Russia.
Economic Updates
Amidst the Ukraine war, g7 nations posted economic data which supported their currencies. Notably, the global inflation rate rises and banks are creasing interest rates. Inflationary pressure added to risk-off sentiments over the week.
In America, inflation spiked to 7.9 percent, a high level in forty years. Moreover, the recent surge in commodity prices will continue to push inflationary pressure higher and higher in the coming months.
Inflation is not the only thorn tormenting consumers. Banks are talking about increasing interest rates, and some have already raised the lending rates. But Japanese government chose to remain different and not increase lending rates.
As interest rates increase, so does loan servicing increases. Most banks have increased bank overnight borrowing by 25 basis points. That’s not all. Even as the war continues, most banks have indicated they would soon raise interest rates by 0.50 percent.
Brent Oil Price Forecast
Crude oil prices surged to new highs in the week. Two factors drove Brent oil price forecast: US oil inventories declined 1.9 Million barrels. Two, UAE insisted it would not increase output production past the OPEC+ supply pact.
Economic Review and performance of G7 currencies
Table: g7 currencies performance summary
| Currency pair | 5th Mar 2022 | 11th Mar 2022 | Average price | Percentage change | Remarks |
| USD | 99.295 | 99.130 | 98.792 | 0.465 | increase |
| GBPUSD | 1.3102 | 1.3936 | 1.3101 | 1.4291 | drop |
| EURUSD | 1.0852 | 1.0909 | 1.0944 | 0.1556 | drop |
| USDCHF | 0.9253 | 0.9346 | 0.9290 | 1.97499 | drop |
| USDJPY | 115.29 | 117.28 | 116.04 | 2.18 | drop |
| USDCAD | 1.2818 | 1.2743 | 1.2802 | 0.1021 | increase |
| AUDUSD | 0.7316 | 0.7290 | 0.7310 | 1.0851 | increase |
| NZDUSD | 0.6830 | 0.6862 | 0.6834 | 0.092 | increase |
Once again, the Greenback came out on top, as hopes on Russia and Ukraine negotiations wanned at the end of the week.
Dollar Update, Upbeat
The continued dollar continued with its weekly rally. For the week, it gained 0.48 percent to 99.124. Previously, it had gained over two percent. Russia’s incursion into Ukraine uplifted the dollar. In addition, Inflation and jobless claims bolstered the dollar.
Initial jobless claims expanded by 11 thousand to hit 227 thousand. And annualized inflation rate accelerated to 7.9 percent from 7.5 percent. The alarming inflation rate casts more uncertainty on Fed’s monetary policy on the market.
In addition, a rise in yields, risk aversions, safe-haven demands, and Fed’s rate hike expectations influenced recent currency exchange rates.
Market GBP USD
This week, market gbp usd continued on its losing streak. In the week, it slid by 1.46 percent to 1.3037, having fallen by 1.33 percent in the previous week. Britain released mixed economic data, which did little to support market gbp usd.
Manufacturing and industrial production and GDP data supported sterling points. Industrial and manufacturing production intensified by 0.7 percent and 0.8 percent, respectively. And Britain’s economy expanded by 0.8 percent to reverse a 0.2 percent contraction in the previous month.
UK’s trade data weighed heavily on the sterling pound. According to investing.com, the trade deficit in the UK widened to 26.60 billion pounds from 12.53 billion pounds.
Euro Exchange Rate Analysis
Euro also continued with weekly losses since the start of the Ukrainian war. In the week, it slid 0.15 percent to 1.0912. Previously, it lost a whopping 3.02 percent to1.0928. Earlier in the week, the German economy uplifted the euro exchange rate analysis.
Factory orders improved by 1.8 percent, and industrial production went up by 2.7 percent. In addition, consumer spending influenced recent currency exchange rates. Despite the escalating consumer prices, retail sales rose by 2.7 percent.
Eurozone also posted improved GDP numbers, but the ECB meeting overshadowed the GDP and inflation data. As expected ECB meeting on Thursday left lending rates unchanged. Further, ECB announced it would end the asset purchase program sooner than planned.
ECB adopted a hawkish stance even after President Lagarde’s cautionary statement. Lagarde warned Ukraine’s invasion would impact economic activity and ramp up inflation.
USD To Franc
This week swiss franc depreciated 1.9749 percent to 0.9346 against the American dollar. Previously it had gained 0.9108. The Russia/Ukraine war fears weighed heavily on the Swiss franc.
Safe-haven flows favored usd to franc rate. Switzerland surprised traders with a revitalized promise to stem the strengthening swiss. Switzerland’s national bank governor indicated they are prepared to intervene if the Swiss franc grows in strength.
Swiss Unemployment rate declined to 2.5 percent in February versus 2.6 percent in January.
US To Cad FX Rate
Loonie depreciated by 0.10 percent to 1.2744 against the Greenback. In the week before, it had subsided by 0.14 percent to 1.2731. Trade and employment numbers uplifted us to cad fx rate in the week.
Employment numbers surged by 336.6 thousand in February after declining by 200.1 thousand in January. The improvement in employment data downsized the unemployment rate to 5.5 percent from 6.5 percent.
The trade balance in Canada expanded to 2.62 Canadian dollars from 1.58 billion Canadian dollars. Oil and commodity prices spiked over the week but could not push the Canadian dollar to the green zone.
It seems negative sentiments from the Ukrainian crisis and economic sanctions against Russia overshadowed the effect of the rising prices.
Recent Currency Exchange Rates In The Asia-Pacific Region
In the Asia Pacific region, bears firmly took control of the Aussie Dollar, Kiwi Dollar, and Japanese yen. These Asia Pacific currencies took the top three positions in the week before.
Aud Dollar Analysis
According to a dollar analysis, the Aussie dollar fell 1.04 percent to 0.7293 after gaining 1.9082 the previous week. In the week, consumer and business confidence slightly influenced recent currency exchange rates.
While the business Confidence Index climbed edged higher to 13. 0 from 4.0 to 13.0, consumer sentiment waned. AUD dollar analysis shows Australia’s consumer Sentiment Index plunged by 4.2%, following a 1.3 percent previous.
New Zealand Currency Exchange Rate
Kiwi Dollar fell by 0.74 percent to 0.6809 against the dollar. In the previous week, it had lost 1.811 7 against Greenback. Later in the week, business index and electronic card retail sales figures had mixed reactions for the New Zealand currency exchange rate.
Electric retail sales declined by 7.8 percent, reversing a three percent surge in the prior month. New Zealand’s manufacturing index improved to 53.6 from 52.3. However, the improvement was not sufficient to uplift the kiwi dollar, which tumbled heavily on Friday.
Usd Jpy Rate
For the week, the Japanese Yen plunged by 2.15% to117.290, becoming the week’s highest loser. Previously, it had gained 0.65% to 114.820. Japan posted negative GDP and household spending data.
As a result, Japan’s economic growth declined to 1.1 percent from 1.4 percent every quarter. Yearly, Japan’s economy shrank to 4.6 percent from 5.6 percent. Similarly, Household spending data boosted usd jpy rate. In January, household spending shrank by 1.2%.
The yen lost heavily on divergence in monetary policy with others. Japan still maintains very low-interest rates while other nations hike rates to beat inflation.
Week Ahead
The Ukraine crisis is not ending anytime soon, so we expect to continue driving the forex market. President Putin is adamant and continues to bomb Ukrainian cities and kill civilians despite diplomatic engagement.
- Will Russia ramp up the onslaught?
- Will diplomacy prevail?
- Or will Putin give in to the crippling economic sanctions?
Away from the war and economic sanctions, economic updates and monetary policies will also drive USD current currency exchange rates.
Don’t miss our following analysis.
But meanwhile you can check out: Recent Currency Exchange Rates from 5th to 11th Mar 2022