The safe-haven US Dollar gained further ground on Sterling and Euro on Friday as market participants favoured buying in to less riskier assets given the rising unrest in Ukraine. News over the weekend that there has been “substantial progress” made in peace talks between Russia and Ukraine will be greatly welcomed by investors. Mr Slutsky said, “according to my personal expectations, this progress may grow in the coming days into a joint position of both delegations, into documents for signing”. Ukrainian negotiator and presidential advisor Mykhailo Podolyak also said on Sunday that he believes a deal can be made by both sides “in the coming days”, noting that his Russian counterparts “had become more constructive” as talks have progressed. If these reports are indeed true, safe-haven demand would plummet and Sterling and Euro would likely spike.
This week both the Federal Reserve and Bank of England have their latest policy meetings. Both central banks are expected to hike rates with the Fed having their meeting first on Wednesday. The Fed have already “clearly broadcast that it intends to raise its target fed funds rate by a quarter percentage point from zero”. Whereas the Bank of England “looks set to lift interest rates to 0.75% on Thursday, its third rate rise in a row”. The BoE was the first major global central bank to push up interest rates since the start of the pandemic with an increase to 0.25% in December. Investors are pricing in that the BoE will raise rates to 2% by the end of 2022.
GBPUSD opened Friday at 1.3073 and closed not far off below at 1.3061.
GBPEUR in contrast gained some upside on Friday – opening at 1.1900 and closing at 1.1940.
EURUSD depreciated further in the Friday session. The pair started at 1.0984 and finished at 1.0938.