Forex Today: Dollar bid as Ukraine conflict rages on, Powell in focus

Here is what you need to know on Monday, March 21:

The US dollar remained bid, as the market turned risk-averse on Monday amid a prolonged Russia-Ukraine war. Escalation of the conflict sapped investors’ confidence after Ukraine refused to surrender the embattled southern port city of Mariupol as Russia warned of humanitarian 'catastrophe’.

As the crisis intensified, it poured cold water on hopes for diplomacy seen over the previous week. Traders also weighed in the hawkish comments from Fed officials amid the fallout of the call between US President Joe Biden and China’s President Xi Jinping. President Biden warned China of consequences if it supported Russia’s invasion of Ukraine.

Meanwhile, markets were also disappointed after People’s Bank of China (PBOC) refrained from cutting the mortgage lending rates, leaving them unchanged in the first quarter of this year.

Mounting tensions surrounding the Ukraine crisis re-ignited the rally in oil prices, as European Union (EU) mulls whether to impose an oil embargo on Russia. The EU leaders and Biden are scheduled to meet on Monday to firm up the West's response to Moscow.

Traders now look forward to the speeches by ECB President Christine Lagarde and Fed Chair Jerome Powell later in the day, in absence of the first-tier economic news on both sides of the Atlantic.

Heading into the European session, the S&P 500 futures shed 0.34% on the day, indicative of a risk-off market profile while the US dollar index was last seen up 0.10% so far, trading around 98.35.

EUR/USD loses its recovery momentum and turns back into the red zone below 1.1050, courtesy of the risk-off flows-driven dollar’s strength, stabilizing Treasury yields. The shared currency ignores hawkish comments from ECB policymaker Robert Holzmann, as he argued for a rate hike.

GBP/USD extends its correction from weekly highs, now pressured around 1.3150. The BOE hiked key rates by 25 bps but showed hesitance in its future tightening plans. Soaring inflation continues to threaten economic growth. Focus this week remains on the UK inflation and Retail Sales data.  

USD/JPY consolidates just below six-year highs of 119.41 reached last Friday, as the Fed-BOJ monetary policy divergence played out. The Japanese central bank left the policy settings unchanged yet again in its March meeting.

Gold finds support from the renewed geopolitical concerns, although the upside attempts could be limited below the 21-DMA of $1,941 amid a firmer dollar.

After the previous week’s recovery rally, Bitcoin has eased slightly, trading around $41,000. Ethereum lacks a clear directional bias around $2,850.