US dollar continues to outperform its main rivals


Sterling fell on Monday to its lowest level since September 2020, continuing to nearly hit two yearly lows against a strengthening US dollar.

Money markets have scaled back their bets on future monetary policy tightening from the Bank of England as they are now expecting the central bank to not raise interest rates as aggressively as projected. The BoE seemed mainly worried about the risks of a possible recession and a slowdown in the labour market. However, hawkish comments from its fellow central banks last week also raised the risks of aggressive policy tightening by global central banks. Money markets expect the US Federal Reserve to raise interest rates by a half point at the next two meetings and the European Central Bank to raise interest rates by 25 basis points in July.


The euro managed to finally claw back some of its losses against the pound during Monday’s trading day, but investors will be closely watching how the ECB are looking to go ahead in the coming months. Many investors believe the possibility that the most dovish central bank may not even raise rates and will continue to go with the original plan to review interest rates next year.


The Russia-Ukraine tensions are still very much happening and the continued traction gained by Russian troops is a major factor in global markets. Through the ongoing war we have seen the dollar receive constant safe-haven flow and that is expected to continue until some form of resolution happens. However, this is looking very unlikely as President Putin is clearly not putting off the takeover of Ukraine’s eastern regions.