EM Market Report George Washington

Dollar races to January 2017 highs

Thanim Islam
Thanim Islam 28 April 2022

GBP: Bit of reprieve for the pound

EUR: Euro suffers on fears of gas being cut

USD: Dollar still ruling the markets

Sterling 

Despite a tough morning yesterday sterling managed to get some respite against some currencies by the end of the day tracking the performance of equity markets that managed to finish in the green.

Sterling’s performance will likely take cues from risk appetite in markets for the rest of the week and hopes of any upturn to come from any hawkish tone from the Bank of England next week or should the Bank refrain from being dovish on their rate outlook.

Euro 

The euro bore the brunt of selling pressure yesterday as gas prices soared higher. Whilst reports suggest four European gas suppliers settled payments to Russia in rubles, there were calls from the EU yesterday asking gas companies to refrain from settling in the Russian currency. Russia showed earlier in the week the consequence of failing to make payments in their local currency by cutting gas supplies to Poland and Bulgaria; so, concern now lies in whether the same could be imposed on other EU nations.

We also had Germany revise growth lower on account of the conflict.

As a result, the euro lost another 0.77% against the US dollar and lost 0.6% of the gains it has made over the pound over the last week.

FX options markets are now pricing in a 35% probability that we will see parity on the EURUSD rate by year end.

Data points today will come in the form of Spanish and German inflation figures as well as consumer confidence figures.

US dollar 

The dollar index soared to 103.5, the highest since January 2017 as expectations for the Fed to implement the first of a series of 50bps rate hikes and aggressive tightening next week, negative geopolitical news flows and ongoing China lockdown concerns all supported the growing demand for the greenback.

The major data point today will be the 1st quarter of 2022 growth figures expected to be revised lower to 1% on account of the rising Omicron cases as well as the impact from the Russia and Ukraine conflict. Unless this figure disappoints then expect the dollar to remain in demand.

Market rates 

Today's Interbank Rates at 09:44am against sterling movement vs yesterday.

Euro

€1.191

US dollar

$1.255

Australian dollar

$1.756 -

South African rand 

R19.92

Japanese yen

¥164.1

Have a great day.