IFX Market Report: Monday 28th February 2022

Sterling fell against both the US Dollar and Euro on Friday as market sentiment continued to worsen due to ongoing conflict in Ukraine. Over the weekend, Vladimir Putin ordered Russia’s nuclear deterrent forces to be put on high alert and claimed “aggressive statements by NATO leaders and economic sanctions against Moscow” were the reason behind the decision. Speaking on Russian state television yesterday, Putin said that Western counties had taken “unfriendly measures against our country in the economic dimension”, claiming the imposed sanctions to be “illegitimate”. Putin’s comments came after the EU, US, UK and Canada agreed to cut off several Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) payments system. The intention behind the move is to “further isolate Russia from the international financial system”, given that Russia is heavily reliant on the SWIFT system for its key oil and gas exports. It’s likely that if more sanctions are posed against Russia, or the conflict in Ukraine continues to persist, investors will further buy into safe-haven assets such as the US Dollar.

After a tough week, Sterling declined against the Dollar once more, dropping almost below the 1.34 handle by the close. GBPUSD opened on Friday at 1.3418 and closed at 1.3408.

GBPEUR also fell on Friday – opening at 1.1972 and closing at 1.1911.

EURUSD in contrast was able to gain almost 50 pips in the Friday session. The pair started at 1.1208 and finished at 1.1257. Friday’s upside came as a relief to Euro bulls after EURUSD fell to 1.1105 on Thursday, its lowest since June 2020.

On the data front today, it’s a quiet schedule. At 11:30 ECB member Fabio Panetta will be giving a speech, followed by ECB President Christine Lagarde at 15:50. From the US, at 13:30 January’s Goods Trade Balance and Retail Inventories excluding Autos MoM will both be released.

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