Sterling has begun the day under pressure against the dollar. The pound suffered from the market flight into safe haven currencies when Russian President Vladimir Putin ordered the deployment of troops into two breakaway regions in Eastern Ukraine after recognising them as independent on Monday. . Sterling fell around half a cent against the greenback after Putin’s announcement . Against the euro . the pound showed little reaction . Fast-rising inflation pushed up the British government’s debt interest bill sharply in January, reducing the seasonal start-of-the-year budget surplus in the public finances, official data from the Office of National Statistics showed on Tuesday. The European Union’s top negotiator in post-Brexit talks with Britain said on Monday that latest negotiations on the deadlock over trading rules for Northern Ireland had brought “neither a breakthrough nor a breakdown”. European Commission Vice-President Maros Sefcovic said in a joint statement with British Foreign Secretary Liz Truss after a meeting in Brussels that both sides had agreed to pursue further regular discussions . Later today Bank of England’s policymaker David Ramsden will be speaking at the National Farmers Union Conference
The euro has steadied in early trading against the dollar after falling when risk sentiment soured late Monday, when Russian President Vladimir Putin declared Donetsk and Luhansk in Eastern Ukraine as independent states and ordered Russian troops into those states on a reported peacekeeping mission. These actions magnified fears of a further incursions into Ukraine and sparked a sell off in world equity markets and flight to safer assets . Data released yesterday showed that the euro zone economic recovery regained momentum this month as an easing of coronavirus restrictions gave a boost to the bloc’s dominant service industry . IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as guide to overall economic health, jumped to a five-month high of 55.8 in February from 52.3 in January, significantly above the consensus 52.7 forecast.
The dollar benefitted from safe-haven flows which dominated financial markets after the Kremlin announced that Russian President would sign a decree to recognise the breakaway regions of Eastern Ukraine as independent nations and deploy Russian troops . Following the announcement risk- sensitive assets struggled to find demand and the greenback stayed resilient against its major peers . US Ambassador to the United Nations Linda Thomas -Greenfield said Washington will coordinate with its allies and announce new sanctions against Russia on Tuesday . However , President Biden administration officials said Putin’s move did not trigger a broad package of sanctions that the United States and its allies have been working on if Russia invades Ukraine because Russia already had troops in the disputed region. Federal Reserve Governor Michelle Bowman said on Monday that she will assess incoming economic data over the next three weeks in deciding whether a half percentage point interest rate rise at the central bank’s next meeting in March is needed, a stance that reinforces divisions among policymakers on how aggressively to begin its tightening cycle.