GBP

Sterling fell against the dollar yesterday as risk aversion returned to the markets. Traders turned cautious when the foreign ministers of Russia and Ukraine failed to make progress on a ceasefire in peace talks in Turkey. Following the meeting, Russian foreign minister Sergey Lavrov said that they had already presented Russia’s conditions to end the conflict and reiterated that Ukraine must be neutral. Against the euro, the pound remained relatively unchanged on the day. Data released from the Office for National Statistics (ONS) this morning showed the UK economy rebounded much more than expected in January from its covid related downturn in late 2021, adding to the case for the Bank of England policymakers to raise interest rates at next week’s meeting. The figures showed that Gross Domestic Product (GDP) grew by more than 0.8% month-on month in January after a 0.2% decline in December, beating economists forecast of 0.2% growth. This morning the Bank of England will release its Consumer Inflations Expectations survey.

EUR

It was a roller coaster day for the euro on Thursday. Having gained around half a cent against the dollar, when the European Central bank surprised the market by announcing that they will end their bond buying stimulus programme in the third quarter rather than the end of the year which markets expected, the single currency’s gains were short lived when ECB president Christine Lagarde’s made cautious comments on the economy. In the press conference which followed the central Bank’s policy announcement, Lagarde warned that the risks to eurozone’s economic outlook have increased substantially with the Russian invasion of Ukraine and are tilted to the downside.

USD

The dollar regathered its strength on Thursday as cautious market sentiment returned creating a demand for safe haven assets. Also helping the greenback’s cause was a strong inflation report, which showed US consumer prices surging 7.9% year-on-year in February, the largest annual increase in 40 years and all but guaranteeing that the Federal Reserve Bank will raise interest rates at next week’s meeting. On a day light of economic data, the highlight will be the University of Michigan’s consumer sentiment index for March.

Economic Calendar

09.30 GBP BOE’s Consumer Inflation expectations
15.00 USD Michigan Consumer Sentiment index