The conflict in Ukraine heavily affected the euro and European currencies on Monday, while the dollar hit its highest in almost two years, investors fear for the economy of the Old Continent and fear inflation. The possibility of Russian oil sanctions sent the euro to its lowest level since May 2020 at $1.0806 in early trading. Around 19:45 GMT, the European currency fell 0.59% to $1.0863. Since the beginning of the conflict, the euro has lost almost 4% against the safe-haven dollar.
The dollar index, which measures the value of the dollar against six other major currencies, rose 0.49% to 99.12 points, its highest level since May 2020. prices, the US central bank (Fed) is expected to raise rates several times this year. On the other hand, on the side of the ECB, the turns of the monetary screw are moving away, analysts say, which puts pressure on the European currency. “Heightened economic uncertainty due to Russia’s invasion of Ukraine has led to a sharp reassessment of monetary policy expectations by the European Central Bank (ECB).”noted Sean Osborne from Scotiabank.
Ricochet effect in the West
“The economic damage caused by the war in Ukraine could now delay the ECB’s first rate hike until early 2023 and possibly longer, depending on how the situation develops.”added chief foreign exchange strategist Scotiabank. “Meanwhile, the dynamics of US employment and inflation will keep the Fed on the path of tightening.”, he noted. While the Fed will hold a meeting on monetary policy next week, the meeting of the ECB’s Board of Governors will take place on Thursday. The European body does not have much leeway in the face of the twin risks of an inflationary shock and slowdown in the eurozone. “Despite price increases, the ECB is likely to delay its monetary tightening schedule.” also judge Han Tan, an analyst at Exinity.
In the foreign exchange market, the first victim of the conflict was the ruble. The Russian currency fell 16% to 139.29 rubles per dollar after hitting 177.26 rubles, a new all-time low. Since January 1, the ruble has fallen by 51%. The currencies of the countries bordering Ukraine were also affected: -2.5% for the Polish currency at 4.58 zloty per dollar after hitting a new low since November 2000 at 4.62 zloty. The Hungarian forint traded at 364 forints to the dollar after hitting a historic low of 367.94 forints. Sanctions against the export of Russian oil “rebound from savings» European, “reducing supply in the world market, raising prices for industry, and making the rise in the cost of living even more painful”Suzanne Streeter, an analyst at Hargreaves Lansdown, reports.
Europe is far more dependent on Russian gas than the US. Thus, the expected impact on the growth of the Old Continent is greater than on the US economy, which is less connected to the economies of Russia and Ukraine. Traders have also limited their buying of the British pound as the Bank of England meets next week. The British pound, which has suffered less so far (-3% since January 1), fell sharply on Monday (-0.94% to $1.3106), a level that has not been seen in more than a year. In this grim context, gold, the safe haven, surged against the 1994 dollar around 1945 GMT after hitting a new high since August 2020 at $2002.59.
Monday lesson Friday lesson
19:45 GMT 22:00 GMT
EUR/USD 1.0863 1.0928
EUR/YEN 125.33 125.48
EUR/CHF 1.0063 1.0018
EUR/GBP 0.8289 0.8260
USD/JPY 115.37 114.82
USD/CHF 0.9264 0.9167
Pound sterling/US dollar 1.3106 1.3230