IFX Market Report: Tuesday 22nd February 2022

GBPEUR was able to close beyond the 1.20 handle on Monday as investors continue to bet on further Bank of England interest rate action. The US Dollar also advanced in yesterday’s session as geopolitical tensions dampened market sentiment. Downing Street has warned that Russia’s plan for invading Ukraine has effectively “already begun”, noting that the Russian “playbook” for launching military action against Ukraine had begun to “play out in real time”. Yesterday Foreign Secretary Liz Truss held talks with NATO Secretary General Jens Stoltenberg in Brussels to discuss the crisis. Ms Truss said after the meeting that NATO allies would be “stepping up preparations for the worst case scenario” given that an invasion is looking “highly likely”.

While expectations of an incoming Bank of England rate hike boosted Sterling’s performance on Monday, an increased demand for the Greenback forced Cable to make a loss in the session. GBPUSD opened at 1.3627 and closed at 1.3609.

GBPEUR in contrast made impressive gains on Monday. The pair opened at 1.1980 and finished the day 1.2002.

EURUSD was pushed to the downside yesterday as an in-demand Dollar proved too much for the Single Currency. EURUSD started at 1.1375 and closed at 1.1338.

On the data front, at 07:00 the UK released its Public Sector Net Borrowing figures for January. Forecasted at £3.5B, with a previous of £-16.8B, the Actual reading came through at £2.9B. At 09:00 Germany released February’s IFO Business Climate, coming in at 98.9, 2.4 over forecast. At 10:45, Bank of England and Monetary Policy Committee member Dave Ramsden will be speaking. Any comments that may support hawkish action from the BoE would likely push the Pound higher. In the afternoon, the US will release its latest Housing Price Index MoM, Flash Markit Manufacturing PMI, and CB Consumer Confidence.

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