Inflation and central banks have taken a backseat to geopolitics in financial markets, and currency markets are no exception.

The dollar was broadly weaker against most of its major peers during London trading on Thursday, despite ongoing concerns surrounding geopolitical tensions between Russia and Ukraine.

A strong set of US retail sales figures was not enough to prevent the US dollar ending the London trading session lower against most of its major peers on Wednesday.

Risk assets recovered some of their lost ground on Tuesday, as investors perceived the chances of a Russian invasion of Ukraine as lessened relative to the weekend.

The theme in the FX market on Monday was one of risk aversion, with risk assets selling off and the safe-havens rallying amid heightened concerns over ongoing Russia-Ukraine tensions.

Volatility has made a triumphant return to markets so far in 2022, as macroeconomic and geopolitical shocks continue to buffet markets.

Our market analysts have been saying for some time that the ECB was underestimating the persistence of excess inflation, and last week’s hawkish message proved just that. Get to know our market analysts and hear their thoughts on last week’s ECB announcement and the key indicators to look out for when forecasting currencies.

Currencies took a breather on Monday following a very busy few days last week that saw no shortage of volatility.

We have been warning that the ECB’s plans to wait until 2023 before hiking rates were a pipedream in a world of rising inflationary pressures, and our view was fully vindicated last week.