GBP

Sterling has begun the day trading at its lowest level since December 2021 against the euro. The single currency enjoyed a relief rally built on renewed optimism of a diplomatic solution between Russia and Ukraine and gained almost 1% against the pound yesterday. Against the dollar, which was broadly weaker amid improved market sentiment, the pound made moderate gains. Major British retailers increased their prices by the most in almost 11 years, according to a survey published this morning that reinforces expectations that the country’s inflation rate is set to accelerate further. The British Retail Consortium (BRC) said shop prices rose by 2.1% in March, the fastest annual increase since September 2011, up from 1.8% the previous month.

EUR

The euro gained over 1% against the dollar yesterday buoyed by encouraging headlines related to constructive peace talks in Istanbul. Following Tuesday’s talks, the Russian defence ministry announced that it will scale down military activity around Kyiv and Chernihiv, but more importantly, one of the negotiators noted that they had made enough progress to hold a meeting between Ukraine President Zelenskyy and his Russian counterpart Vladimir Putin. Any step toward a ceasefire or potential peace deal in Ukraine supports the euro, as Europe is seen suffering the most significant economic blow from the conflict. The euro was further underpinned by surging German government bond yields as the benchmark 10-year bond yield shot to levels last seen in 2018. Later today German inflation data will be released.

USD

The dollar fell against a basket of currency peers on Tuesday as reports of progress in peace talks between Russia and Ukraine reduced the safe-haven appeal of the greenback. After Russia said it would scale down military operations around Kyiv and Ukraine proposed adopting neutral status, the dollar index lost 0.7% and the 10-year US bond yield lost 1.3%. However, markets remain cautions this morning after the Pentagon said Russia was moving troops around Kyiv instead of withdrawing them and on a similar note British military intelligence argued that Russian units were returning to neighbouring Belarus to reorganise and resupply. US GDP figures and the ADP employment report are due later today.

Economic Calendar

12:00pm EUR German Harmonised Index of Consumer prices
12:15pm USD ADP Employment report
12:30pm USD Gross Domestic Product Annualised (Q4)