GBP

Sterling regained most of yesterday morning’s losses late in the afternoon as market risk sentiment improved . The pound had been under pressure when Russian President Putin declared Donetsk and Luhansk in Eastern Ukraine as independent states and announced he will be deploying troops in those states on a peace keeping mission . However , as fears eased over a military conflict between Russia and Ukraine reduced safe haven flows , sterling benefitted . Speaking at National Farmers Union conference yesterday, Bank of England’s deputy governor David Ramsden said the central bank will need to raise interest rates slightly more over the coming months , but their longer -term path is hard to predict due to uncertainties including the Russia-Ukraine conflict . Financial markets are currently pricing in rates rising to nearly 2% by the end of this year , well above the levels which the BoE’s forecasts published on Feb. 3 suggested would be needed to get inflation back to its 2% target by early 2024. Bank of England Governor Andrew Bailey will present the Monetary Policy Report before parliament’ s Treasury Committee this morning

EUR

The euro has gained some momentum against the dollar as risk sentiment leans positive . The sanctions imposed on Russia were not seen to be as disruptive to the global economy as they could be and as riskier assets rallied the dollar lost some demand . The European Central Bank could begin increasing interest rates before ending its bond purchasing programme, ECB policymaker Robert Holzmann said in an interview with Swiss newspaper NZZ, challenging the bank’s long-held view on the sequence of its upcoming policy moves. With euro zone inflation rising to record highs in recent months, the ECB has given up on a pledge not to raise rates this year and several policymakers are openly advocating an end to bond purchases this year, previously stated as a prerequisite for any rate hike.

USD

The dollar lost ground as safe haven flows eased when it became clear that the first wave of US and European sanctions on Russia would not damage global energy supplies. Speaking to reporters at the Whitehouse yesterday US President Biden said the United States would impose sanctions against two large Russian financial institutions and Russian sovereign debt , some Russian elites and their family members as well. Market nerves were also eased when Biden said the United States would continue to provide “defensive assistance” to Ukraine but had no intention of fighting Russia ,

Economic Calendar

09.30 GBP BOE Monetary Policy Report hearings
09.30 GBP BOE’s Governor Bailey speech