IFX Market Report: Wednesday 23rd February 2022

Sterling lost momentum on Tuesday, falling to a six-day low against the US Dollar and Euro as investors became increasingly “cautious on the British currency amid the Russia-West stand-off over Ukraine”. The UK Government yesterday “announced a series of sanctions against Russia after it ordered troops into two rebel-held regions of eastern Ukraine”. After recognising Donetsk and Luhansk as independent on Monday, Vladimir Putin ordered troops into the region, claiming that Russia are there in an effort of “peacekeeping”. The Foreign Office stated Tuesday that “unprecedented” measures, specifically targeting the Russian financial sector have been prepared if an invasion occurs. Further uncertainty on the conflict will likely cause Sterling more problems.

Also weighing heavy on the Pound, Bank of England Deputy Governor Dave Ramsden speech caused more uncertainty amongst investors, claiming that “it is difficult to make predictions about where monetary policy might be headed in the medium term”. This came to a surprise to investors given that Ramsden this month “was part of a minority who voted for a bigger increase to 0.75%, which would have been the first half-point rise since BoE independence in 1997”. At present, financial markets “currently price in BoE rates rising to nearly 2% by the end of this year”.

GBPUSD opened Tuesday at 1.3563 and managed to close not far off the 1.36 handle, finishing the day at 1.3594.

GBPEUR in contrast made a loss yesterday. GBPEUR opened strong at 1.2008 but downside pressures proved too much for Sterling, and the pair closed at 1.1986.

EURUSD made impressive gains on Tuesday. The pair opened at 1.1296 and closed at 1.1342.

At 07:00, Germany released its latest GFK Consumer Confidence, coming in at -8.1, with a previous of -6.7. At 10:00, the Eurozone will release January’s final Core Inflation Rate YoY, Inflation Rate MoM and YoY. In the afternoon, at 12:00 the US releases its latest MBA Mortgage Applications. Finally at 17:00, BoE member Silvana Tenreyro will be speaking.

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