The U.S. Dollar fell overnight as new developments came along for markets and geopolitical risk.
Overview
Believe it or not, this morning I am forced to write about COVID resurgence. Yes, indeed, the disease never went away, particularly in Asia where the battle in Hong Kong has now translated into a mainland China problem. China has gone ahead and mandated lockdowns for major cities. Typically, you could see the dollar rising as a result of such a negative news item, but perhaps the pandemic has lost its major influence on the FX swings.Naturally, we have to worry about what this all could mean to a fragile economy that now deals with the physical difficulties of an armed conflict that is preventing the desired flow of minerals and metals trading, necessary for modern industrial life. At least nickel trading is back on and WTI Crude Oil has gone down below $100.00/barrel.We are in the midst of a lot of physical chaos, affecting commercial trading and all that it entails. Hopefully, the medical front does not become a further reason for concern as the world is now coping with perhaps too large a humanitarian crisis. Asian stock gauges are already indicating they are at 19-month lows. Thus far, the buck has remained mostly quiet.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro picked up a half-percent gain overnight as it tries to stay afloat while concern grows about the length of the Ukraine-Russia fight. Russia’s attempts to reach a resolution have failed and the European Union is thinking about what it could do to deter and aggressive Vladimir Putin.While economic isolation has been declared via multiple sanctions and business ousters, EU leaders recognize a long-term conflict only exacerbates economic difficulties and want a solution, which is why Germany is reaching out to Moscow and France alike. Last week, the European Central Bank had met for an assessment and came out more positive than expected, but optimism can quickly die the more the war escalates. Expect volatility to remain high and it is unfortunate to have to type out that Germany and the Netherlands are seeing major COVID flare-ups.
GBP
Sterling has escaped its November-2020 lows as hawkish sentiment builds ahead of Thursday’s Bank of England decision meeting. The BOE is indeed expected to hike interest rates for the third time, all in the name of combating very high inflation.
Although the U.K. has been more untied with European peers ever since the Russian invasion of Ukraine, we expect Britain to mostly concentrate on its economic recovery not being too affected by the isolation of Russia and cutoff from its energy. Pound could have room for appreciation.
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