Yesterday, the rate saw some slight gains initially against the Dollar thanks to an improvement in sentiment in Ukraine following ‘successful’ talks with Russia, giving hopes of a potential de-escalation. These gains were however short lived as the Dollar fought back and managed to avoid any losses as US Treasury Yields continue to rise, attracting investors to buy into the currency. So far today the rate has teetered in and out of a loss but has currently settled with some slight gains. The Pound will likely struggle to extend these gains as it is still nursing its wounds after BoE Governor Andrew Bailey struck a more dovish tone in his speech on Monday. In a speech titled ‘Macroeconomic and Financial Stability in Changing Times’, Bailey reiterated the bank’s cautious outlook on monetary policy. When asked whether the BoE might be considering a May interest rate hike, Bailey warned that both Covid and the war in Ukraine means future interest rates are highly uncertain. As for the Dollar, it may struggle slightly with improving sentiment in Ukraine causing there being a slight decrease in the demand for save haven currencies but with the market heavily anticipating a hawkish approach to interest rate hikes by the Fed, the Buck still remains heavily supported. Later on today, a report on US GDP growth will also be available, potentially providing additional impetus to the currency. The Pound on the other hand has no significant data that may support it today, leaving it vulnerable to the Dollar.
So far this week the Pound has slumped against the Euro pushing the rate all the way down to its lowest levels seen so far this year. Gains were facilitated as the Pound still struggles in the wake of the BoE’s recent dovishness towards interest rates coupled with the ever worsening current cost of living crisis. On top of this, promising negotiations between Ukraine and Russia yesterday helped buoy the Euro as Ukrainian President Volodymyr Zelenskyy offered their countries neutrality in a bid to end conflict provided countries such as the US and UK act as security guarantees. News of this gave the Euro a much needed tail wind given the currency’s recent battering amid fears of the economic fallout that would follow the war. As for economic news and data, the UK is rather quiet with no scheduled events of particular importance. In the Eurozone there is an array of important events today, such as a speech from ECB President Lagarde which may come with surprises after some fellow bank members switched to a more hawkish tone, suggesting potential sooner than expected interest rate hikes. Additionally, Germany will release very important data regarding their Inflation Rate year on year. However, markets will likely remain glued to any developments between Russia and Ukraine.
Published by Frank Brightman (30/03/2022)