Pound headwinds


Over the course of this week the rate has steamrolled all the way down to its lowest levels this year following an overpowering rally by the Euro as talks between Ukraine and Russia strike a more optimistic tone. The negotiators alluded to progress and even hinted at a potential Presidential meeting between the two nations and Russia potentially scaling back military operations around northern Ukrainian cities in order to foster more constructive conditions for talks. News of this was very welcomed by Euro investors and initiated a buying flurry of the currency, which until recently has been heavily suffering. At the time of writing, the Pound has managed to make a slight move against the euro today, keen to recoup some of its losses however the currency will likely be faced with intense headwinds. As for economic data, the UK is quiet for the rest of the day leaving the Pound with not much to chew on. The Euro on the other hand has a lot to digest with data on Unemployment coming out of Germany and a few ECB speeches. On top of this, markets will likely remain glued onto any developments in Ukraine meaning that some data releases may be overlooked.


Both yesterday and so far today the Pound is enjoying a slight tailwind against the Dollar as peace talks between Ukraine and Russia boost market sentiment and ignite hopes of a potential full-scale de-escalation. In negotiations, Diplomats from both countries have reached agreements with Russia promising to scale down military action around Ukraine’s northern cities and in particular Kyiv, whilst Ukraine proposes they join EU but not NATO, maintaining neutral status with Russia. News of this prompted investors to return back to some more riskier currencies such as the Pound, slightly decreasing the need for the Dollars safe haven status. The Dollar will however put up some fierce resistance and cap most of the gains made by the Pound. This comes as investors are still expecting a hawkish approach by the Fed regarding interest rate hikes to curb their record inflationary levels. As for economic data, a GDP report released in the UK earlier showed a growth rate year on year of 6.6%, beating forecasts by 0.1%. This release evidently had little interest as the Pound struggled to gain any momentum as markets likely overlooked the data. The US on the other hand has an array of data scheduled for release today that can add to the Dollar’s strength, if results are favourable.

Published by Frank Brightman (31/03/2022)

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