The US dollar rose sharply against its main rivals for a second straight session and set fresh two-week highs against the euro. Adding to the US dollar’s safety allure was another step in the direction of more aggressive sanctions against Russia as the crisis in Ukraine remains at the forefront of market worries. The euro’s March rally continued to unravel, with the single currency driven lower largely because of a resurgent US dollar. Sterling fell further against an increasingly stronger US dollar as investors consider a sooner rate hike from the Federal Reserve after the US central bank surprised markets with its policy announcement this week.

Sterling

Sterling fell further against an increasingly stronger US dollar on as investors consider a sooner rate hike from the Federal Reserve after the US central bank surprised markets with its policy announcement this week. Britain’s latest inflation data could dampen expectations about higher rates in the UK which could deepen losses for the pound. Cable has now fallen for five consecutive trading days amid concerns that sterling has risen too far too quickly over the past several months.

US dollar

The US dollar rose sharply against its main rivals for a second straight session and set fresh two-week highs against the euro. The US currency could continue to advance if US data on GDP and consumer confidence bolster optimism about a sooner-than-expected interest rate hike from the Federal Reserve. The US dollar soared after the Federal Reserve changed its forward guidance on interest rates and suggested that rates may rise sooner than markets had initially believed. The slowly escalating crisis involving the EU, Russia, Ukraine and the US may encourage more investors to use the US dollar as a safe haven.

Euro

The euro’s March rally continued to unravel, with the single currency driven lower largely because of a resurgent US dollar. Positive PMI data could indicate that the euro area’s economic recovery is moving up a gear and will not require the ECB to cut interest rates further, or consider more aggressive types of easing. The euro surged to a three-month high against sterling in March after the ECB, in its earlier policy meeting, surprised markets by making no changes to its policy despite worries about inflation. The EU’s increasing involvement in the Ukrainian crisis could pose a greater risk to the euro over the coming days and weeks.

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