The pound continued its decline against the dollar on Monday, falling around a cent as risk averse sentiment continued to weigh. The pair is currently trading at its lowest level since October 2020. Against the euro, sterling fared little better. After starting the day at fresh multiyear highs against the single currency, the pound lost 0.6% as Germany ruled out Russian gas sanctions. Renewed Brexit headlines also undermined sterling when Bank of England deputy Governor John Cunliffe told the House of Lords European Committee that it will be years before the full impact of Brexit on Britain’s financial sector, which accounts for about 10% of the UK’s economy, is fully known. The British Retail Consortium – KPMG sales monitor, revealed yesterday that total sales jumped by 6.7% in February as the removal of Covid Plan B restrictions improved high street sales.
The euro remains pinned near its 22-month low against the dollar in early trading amid a return of market risk aversion and as oil prices resume their uptrend. Surging commodity prices since the Ukraine conflict have sparked fears of recession in the Eurozone which is more acutely exposed to Russian economic sanctions than most countries. As a result, the euro’s moves in the foreign exchange market have a correlation with commodity prices, especially oil and gas. This morning, the Gross Domestic Product (GDP) figure for the bloc, which is considered as a broad measure of economic activity and health of the economy, will be released.
After rising 0.75% on Monday, the US dollar index remains steady in early trading. Late yesterday, US congressional negotiators were nearing a deal to fund the government through to the end of the third quarter. Members of congress are racing against a midnight Friday deadline to pass a bill, before existing funds are exhausted. Failure to meet the deadline would either require another stop-gap funding bill or force partial government shutdowns during a time of international crisis. The Whitehouse has also requested $10Bln in emergency aid for Ukraine. On Saturday, Ukraine President Zelensky made a “desperate plea” for help directly to congress members.
10.00 EUR GDP (Q4)