By Tad DeVan, Senior Currency Strategist, MTI
Week of: 02/28/22 – 03/04/22
The markets are continuing to reel as the Russia-Ukraine war rages. The central bank of Russia doubled its interest rate this week to 20% after the ruble plummeted. It also instructed brokers not to execute sell orders from foreigners.
Meanwhile, the U.S. has imposed sanctions against Russia that are the largest ever. And oil prices are soaring through the roof.
The West also announced that some Russian financial institutions would be cut off from SWIFT – the global messaging platform that allows banks to communicate and send funds securely to one another. Plus, the E.U. and U.S. have decided to freeze the Central Bank of Russia’s (CBR) assets.
Traders are closely tracking these events as the mounting geopolitical concerns also further complicate the next move by the Fed, which has signaled that it is prioritizing to bring down inflation and raise interest rates.
Taking cues from the above developments and some data releases, major currency pairs saw some big moves this week.
The U.S. Dollar rose against major peers as traders paused for breath amid the fast-moving geopolitical developments and sought safe-haven bets.
The euro plunged to its weakest level since May 2020 as traders worried about the impact of an escalating war on the region’s economic prospects. Losses were also seen after data showed inflation in Europe hit a record high for the fourth month in a row.
Note that the recent developments are also influencing the European Central Bank’s (ECB) monetary policy decisions. The central bank was expected to have two interest rate hikes this year but that may not happen until March 2023 as the geopolitical tensions pose risks to the country’s growth outlook.
At the time of writing, the dollar index (DYX) stood at 97.62 (up 0.22%), while the euro (EURUSD) was trading at $1.1080 (down 0.40%).
The safe-haven yen is witnessing buying this week and is currently trading at 115.51 per dollar (up 0.54%).
Meanwhile, the ruble sank to fresh record lows this week. It fell nearly 30% to a record low of 120 per dollar earlier on Tuesday.
The rest of the week will see the Ukraine crisis and rising oil prices dominate traders’ minds.
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I hope to see you on the other side!
Have a safe and profitable trading week 😀