Global financial markets were rocked last week when Russia commenced the most significant military operation against a European country since the Second World War. With the invasion of Ukraine and international sanctions being imposed on Russia – and no clear signs of when or how the conflict will be over (even though both countries agreed to start negotiations), investors should expect higher volatility in the coming days and weeks. This uncertainty can be seen by looking at the VIX index – the fear index showing the 30-day expected volatility of the U.S. stock market – currently above the 30-level at the time of writing.

While stock markets are sinking around the globe, key food, industrial, as well as energy commodities are spiking. The Russian ruble (RUB) fell again after losing more than 20% on Monday, while the Swiss Franc (CHF) reached a new high against the Euro (EUR) and the Australian Dollar (AUD) touched its highest level since mid-January against the American Dollar (USD).

Due to higher volatility, Forex trading could be a potential way for investors to capitalize on this uncertainty on the currency market. However, this situation also means more risks, as investor fears could trigger significant and sudden price movements. That’s why FX traders should always follow their trading plan and be careful to implement their money and risk management rules to protect their capital.

While the evolution of the situation between Russia and Ukraine will remain at the heart of concern, as its consequences on the global economic outlook are difficult to assess, there are other important events that could impact the Forex market later on this week.

What else could affect the FX market this week?

• Inflation figures -Consequences of rising energy costs could be seen in the latest European inflation figures, which are expected to double to 0.6% over a month and a new record to 5.6% over a year, according to Bloomberg consensus.
• Central bank decisions – As most central banks have the goal of keeping inflation steady (around 2%), any figures about the evolution of prices are scrutinized by analysts and investors to anticipate how officials might react and what it means for monetary policies. For FX traders, central bank moves have the greatest impact on currencies, as they can impact the availability and cost of money in a given economy, which, in turn, influences the value of the local currency against its pairs. Earlier this week, the Reserve Bank of Australia (RBA) kept interest rates unchanged. The Bank of Canada (BoC) is expected to start its rate hike cycle on Wednesday 2nd March.
• Jerome Powell testimony – A week from the next Fed’s meeting, the Fed Chairman Jerome Powell will testify about the economy twice before Congress – every word he says will be closely followed to get any clues about how the new geopolitical tensions are going to affect rate hikes projections in the United States.
• American employment report (NFP) – February US jobs report will be published on Friday 4th and should describe a strong employment situation, as the Covid-19 Omicron variant infection rate seems to keep falling. The market is expecting a 450K job gain and an employment rate of 3.9%.