GBP

Sterling has fallen against the dollar in early trading amid notable support for the greenback across the board. After steading on Friday after data showed consumer morale falling to its lowest level in 16 months and retail sales unexpectedly declining, the pound has come under pressure as US 10-year treasury yields have risen to their highest level in 3 years in far east trading creating demand for the dollar. Against the euro, the pound is largely unchanged. Later today markets will focus on Bank of England’s Governor Andrew Bailey’s interview with Guntram Wolf, director of economic think tank Bruegal, where it is expected they will discuss the global financial implications of the war in Ukraine and what this could mean for future monetary policy.

EUR

The euro hit a 2-week low against the dollar in Asian trading as the greenback came in for safe-haven demand, following tensions between the West and Russia. Comments from US president Joe Biden that Russian President Vladimir Putin could not remain in power, suggesting an indirect threat to Putin, triggered risk-off sentiment, even though the White House later denied Biden was calling for regime change in Russia. ECB President Christine Lagarde said on Sunday that the central bank does not expect the war in Ukraine will push the eurozone into stagflation even if it does push down growth and raise inflation due to higher energy prices. Data from Germany released on Friday showed business morale in Europe’s powerhouse plummeting. The IFO business sentiment index, considered Germany’s most important economic barometer, fell to its lowest level since the outbreak of the coronavirus pandemic.

USD

The dollar has gathered strength against its major rivals in early trading supported by a negative shift in risk sentiment. US treasury yields hit levels not seen since May 2019, up 6.5 basis points on the day and the US dollar index already up 2.5% this month, found demand. Also supporting the greenback is market speculation that the Federal Reserve Bank will raise interest rates more aggressively in their current rate hike cycle than previously anticipated. Economists at Citigroup said over the weekend that they expect the Fed will raise rates by 0.5% at each of their next four meetings, even though the central bank has not done a hike of that size at a single meeting since 2000. The aggressive call underscores the level of concern about the inflation outlook, which increased considerably in recent weeks following Russia’s invasion of Ukraine and the spike in energy, commodity, and food prices.

Economic Calendar

12:00pm GBP BOE’s Andrew Bailey speech
14:30pm USD Dallas Fed Manufacturing Business index