GBP

Sterling opens this morning in relatively unchanged territory as an absence of data means the markets are left in the hands of risk perception. With the euro having suffered losses over the weekend, the pound is up by around 0.3% this morning against the shared currency. This is mainly owed to the rise in geopolitical tensions as markets ramp-up expectations of an invasion of Ukraine by Russia. Prime Minister Boris Johnson has urged his Russian counterpart Vladimir Putin to “step back from the brink” as he insisted there was still a “window of opportunity” to avoid war in Ukraine, as reported by The Telegraph. Johnson is expected to speak to world leaders today and travel to countries in Europe later this week in an attempt to unite Western allies against the threat of Russian invasion.

EUR

The euro has suffered large losses over the weekend as it opens around 0.5% lower against the dollar this morning. Of all the G10 currencies, the euro has been hit the worst, owing to the rise in likelihood of Russian invasion. The Eurozone is heavily reliant on Russian imports for around 30% of gas consumption, and with tensions rising, their exposure to the increase in gas prices is weighing heavy on the euro. Meanwhile, European Central Bank Governing Council Member Olli Rehn warned in an interview on Saturday, “if we reacted strongly to inflation in the short term, we would probably cause economic growth to stop”. The market will now watch carefully as ECB Head Christine Lagarde will address the European Parliament later today. German Chancellor Olaf Scholz travels to Kyiv today and then to Moscow for talks with President Vladimir Putin on Tuesday, following his calls for Russia to de-escalate and warned of sanctions if Moscow did invade.

USD

The dollar weakened on Friday following weaker than anticipated US University of Michigan Consumer Sentiment survey data, although this was short lived as the dollar has since benefitted from safe-haven flows and remains buoyed off hawkish monetary policy views. The Consumer Sentiment released Friday showed sentiment deteriorating to its worst levels since 2011, posting at 61.7 versus 67.5. Despite this, the dollar has gained through risk sentiment with the US believing that Russian President Vladimir Putin has decided to invade Ukraine and already communicated those plans to the Russian military. With little data to look forward to, traders will likely watch St Louis Fed President James Bullard’s interview with CNBC later today, for any more hawkish comments on Central Bank policy. He roiled markets last week when he announced his desire to see interest rates higher by 100 basis points by 1st July.

Economic Calendar

16:15 EUR ECB President Lagarde Speech