Russia has launched an attack on Ukraine and triggered an intense flight to safety in financial markets. In FX, European currencies will remain under pressure and the dollar should continue to be favoured, in the opinion of economists at ING.
Dollar gets the flight to safety bid
“Given the uncertainty, those geographically closest to the crisis and exposed to the imported energy story – CE3 currencies in particular – to stay under pressure. The Swedish krona also looks exposed – a dovish central bank and a small open economy exposed to what will be lower European growth prospects.”
“While the Federal Reserve tightening cycle may be re-priced lower, we would still favour the dollar to outperform Europe right now. Trade and energy links to Russia are tiny compared to Europe. And dollar liquidity will be in demand at very uncertain times like this. We still like DXY (heavily weighted against European currencies) rising…