The market believes that the stance of the bureau's policy has turned hawkish since the result of the Fed's interest rate meeting at the end of January. The remarks such as ending the bond-buying plan soon, possibly raising interest rates and shrinking the balance sheet at each meeting are all positive for the US dollar to rise above 97. Facing the hottest inflation in the past 40 years, the bureau has to take quick action to maintain price stability. Therefore, some officials also support that increasing 0.5% interest rate is needed. However, in synchronized time, we have also seen milder voices in the bureau, thinking that it is necessary to avoid unnecessary disruption to the economy, the speed and magnitude of interest rate increment should be determined according to the actual situation. The US dollar's rise is limited as result. 

Moreover, the Bank of England raised interest rates by 0.25% as expected after the interest rate meeting in early February. Four of the nine voting members supported a 0.5% interest rate increment. The Central Bank indicated that it would continue to raise interest rates and shrink its balance sheet to fight against inflation. The president of the European Central Bank, whose monetary policy has always been laggard, admitted that inflation will continue and there is the risk of rising. He will no longer raise the argument that it will not increase the interest rates this year. The market believes that his stance has turned hawkish and may start raising interest rates in the middle of the year. The remarks of the European Central Bank led to a large adjustment in the US dollar, and the US dollar index fell back to around 95.20. 

In addition to being influenced by the monetary policies of European and American Central Banks in the foreign exchange market in February, the geopolitics triggered by the situation in Russia and Ukraine may become an important risk this year. With the outbreak of military conflict between the pro-Russian militants in Eastern Ukraine and the Ukrainian government, Russian President, Putin suddenly signed a presidential decree that recognized the independence of the two separate regions of eastern Ukraine, Donetsk and Luhansk. He also signed a treaty of friendship and cooperation, as well as sent Peacekeeping Force to the area. Russia's action is just like an invasion of Ukraine. The United States and other Western countries immediately said they would impose sanctions on Russia. The incident triggered a rise in risk aversion, and the prices of gold and crude oil rose. If the conflict situation intensifies, the relations between Russia and Europe and the United States deteriorate or the cold war. It is believed that inflation will inevitably continue to rise as a result. These will be disadvantaged to those Western Countries that is preparing to declare the end of the epidemic and fully restart the economy.  

Direct support for weapons has only little effect on Ukraine. Russian President, Putin's sanctions against the West should have been assessed and prepared. It is believed that the negotiation and the tension will continue. If the Swiss franc and Yen are popular, the US dollar to Yen falls back below 115. The supporting area near 114 of the 100MA has to pay attention that would continue to reach the bottom of the 112.50 direction in the short term if it is lost.

Patrick Law General Manager of Hantec Group