GBP/USD dipped to 16-month lows below 1.3100.

The focus in Ukraine has been efforts to allow safe passage of civilians attempting to flee from the conflict areas, but little progress has been made, especially with many potential exit routes heading for Russia.

The next round of peace talks is scheduled to take place on Tuesday with Russia demanding that Ukraine with guarantee that it will not join the EU or NATO.

Western countries continued to supply aid and military hardware to Ukraine, but also ruled out any move to impose a no-fly zone.

A key focus globally has also been on the potential for further sanctions against Russia. In particular, the debate surrounding a ban on energy imports from Russia has been a major element.

Oil prices briefly dipped during Monday as the EU ruled out any immediate ban on Russian oil and gas supplies.

The US did indicate that it was prepared to act alone in banning Russian oil and underlying support for crude remained strong with further fears over global supply disruptions.

Fears over the impact of a surge in energy prices had a major impact on asset prices, especially with central banks facing very difficult policy decisions amid stagflation fears.

Wall Street equities weakened further on Monday with the S&P 500 index closing close to 3.0% lower on the day and a steeper decline in the Nasdaq index which pushed the tech index into an official bear market.

There were concerns over the impact of higher energy costs and also unease over the impact of sanctions on Russia. At this stage, the Federal Reserve expected to push ahead with plans to raise interest rates which also sapped support.

In comments on Monday, the Swiss National Bank intervened verbally with a warning that it would engage in currency markets to curb franc gains, although it noted that it would concentrate on the overall currency situation rather than specific currency pairs.

The franc maintained a robust overall tone as demand for defensive assets remained strong.

Commodity currencies tumble

Last week, there was strong demand for commodity currencies with a particular focus on the Australian and New Zealand dollars.

Although the trend continued initially on Monday, there was a sharp reversal later in the session with sharp selling as risk appetite deteriorated. The Australian, Canadian, and New Zealand dollars all posted notable losses.

There was also a sharp correction against the Euro after very strong gains last week.

The Euro attempted to rally during Monday as energy prices retreated, although underlying confidence remained fragile with selling on rallies. EUR/USD hit selling above 1.0900 and retreated to near 1.10850 on Tuesday.

US bond yields edged higher which also provided an element of US dollar support. USD/JPY secured a limited net advance but traded just below 115.50.

Sterling lost ground as the slide in risk appetite dominated the UK currency. GBP/USD dipped to 16-month lows below 1.3100. GBP/EUR dipped from 5-year highs near 1.2180 to 1.2070. The Swiss franc retreated after the National Bank warning with EUR/CHF around 1.0060.

Commodity currencies retreated sharply from intra-day highs on Monday as equities came under renewed pressure with further selling on Tuesday.  AUD/USD dipped to below 0.7300 from 4-month highs above 0.7400. The Canadian dollar also lost ground with USD/CAD above 1.2800 and near 1.2825.

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