The markets are likely to continue to focus on the conflict in Ukraine this week, however, central bank meetings could also impact currencies.
The Federal Reserve will conclude its monetary policy meeting with a press conference on Wednesday and the Bank of England meeting will take place on Thursday. Interest rate hikes are expected on both sides.
However, currencies could respond to any comments from officials regarding the course of monetary policy in relation to the war in Ukraine.
After staging a recovery last week, the euro is likely to continue to respond to events in Eastern Europe this week. Russian and Ukrainian negotiators are due to speak via video link later today.
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GBP: Markets to focus on BoE meeting
The pound weakened against the euro throughout the course of last week and is trading around the same levels this morning.
The Ukraine conflict, as well as the Bank of England’s monetary policy meeting on Thursday could impact sterling this week.
Despite this, the Bank is expected to hike the interest rate from 0.5% to 0.75%. If this expectation is not met and/or if officials express a more cautious approach to raising interest rates due to the war in Ukraine, the pound could suffer.
Before the meeting on Thursday, employment figures will be released for the UK tomorrow. The unemployment rate for January is expected to decrease slightly from the month before.
GBP/USD chart over past year
EUR: Euro likely to continue to respond to Ukraine conflict
The euro strengthened against the pound last week and is likely to continue to respond to events in Ukraine this week.
Market optimism for talks between Ukraine and Russia lifted the euro. Talks are due to resume today week via video link and will start at 10:30am Kyiv time. Meanwhile, reports reveal that the city of Mariupol if being heavily bombed in residential areas.
This week, economic sentiment figures will be released for Germany and the eurozone, as well as eurozone inflation data on Thursday. Several European Central Bank officials will speak throughout the week.
USD: Federal Reserve meeting this week
The dollar is slightly stronger against the euro and the pound this morning ahead of the Federal Reserve’s latest monetary policy meeting this week.
The Fed’s meeting will conclude on Wednesday with the interest rate decision and press conference. Fed Chair, Jerome Powell, suggested earlier this month that the interest rate is likely to be raised from 0.25% to 0.5%. If the meeting reveals that this is the first of several rate hikes this year, then the dollar could benefit.
US retail sales will be released ahead of the FOMC meeting, expected to have dropped month-on-month in February.