GBP

Sterling begins the week under pressure, having lost over a cent against the dollar on Friday. Against the euro, it remains within a tight range. The number of UK manufacturers raising prices has hit its highest level for over 20 years according to a survey published on Monday, which underscores the inflation challenge facing the Bank of England when they begin their 2-day policy meeting on Wednesday. Trade body Make UK and accountants BDO said 58% of manufactures have increased their prices in early 2022, up from 52% at the end of 2021, the fifth quarterly rise in a row and the highest since the survey begun in 2000. The Bank of England is expected to raise interest rates to 0.75% on Thursday, its third rate rise in a row, as it seeks to tame the dramatic surge in inflation that has been intensified by Russia’s invasion of Ukraine.

EUR

The euro has begun the week pressurised by the dollar, hurt by risk aversion sentiment in early trading. The dollar has found support as covid cases begin to rise in China in the past week, with new cases being reported in Beijing and Shanghai, China’s most populous cities. Investors fear a major outbreak could hurt the global economy, adding to the impact already being felt by the Russia-Ukraine conflict. Bank of France chief and ECB policymaker Francois Villeroy de Galhau, speaking on French media at the weekend, said that although the Ukraine conflict is translating into more inflation because of energy costs, the central bank will take as much time as necessary to examine any rate hike decision. Adding to these comments, fellow policymaker Olli Rehn said any adjustments to key rates will be gradual, however they could come weeks or several months after their asset purchasing programme finishes – which is expected at the end of the third quarter.

USD

The dollar has begun the week on the front foot against all its major currency pairings. The dollar index which registered gains for the fifth straight time last week gained modestly and the greenback hit a 5-year high against the yen in early trading. With no major data releases today, the dollar will take its lead from the developments surrounding the Russia-Ukraine crisis. A glimmer of hope toward peace emerged yesterday when US Deputy of State Wendy Sherman said Russia has been showing signs of a “willingness to have real, serious negotiations” on Ukraine. Anton Geraashcenko, adviser to Ukraine’s Interior Minister, announced this morning that a new round of talks via video link will be held today.

Economic Calendar

No major data releases today