Sterling opens today higher against a weak Euro as tensions continue to mount over the war crimes committed by Putin’s forces in Bucha, Ukraine. Against the dollar, the pound has traded sideways with a risk-off mood returning and adding support to the greenback. Commentary from Bank of England policymakers on Monday did not touch on monetary policy and therefore had little impact on sterling’s price. Although, BoE Deputy Governor Jon Cunliffe did warn that the Ukraine war will likely prolong the surge in inflation and tighten the squeeze on households, an assumption the market had already made. Speaking alongside Ukrainian Foreign Minister Dmytro Kuleba, in Warsaw yesterday, the UK Foreign Secretary Liz Truss stated that the west must not lift sanctions against Russia until all its troops have left Ukraine. Adding to this, Truss stated that the sanctions had already set back Russia’s economy by 15 years, but now it was necessary to go to the maximum level of sanctions. Both ministers agreed with the US call for Russia to be expelled from the UN Human Rights Council, a move that will likely be discussed at a meeting of G7 foreign ministers on Thursday.


The euro fell by around 0.8% against sterling and the dollar yesterday as it was pressured by economic worries following developments in Ukraine. Speaking this morning, Ukrainian President Volodymyr Zelenskyy said it is possible that there might not be any meeting between himself and Russian President Vladimir Putin as considering what Russia has done in the country, it’s “difficult to negotiate with them”. Zelenskyy will speak today during a United Nations Security Council meeting on the conflict in his country. Meanwhile, traders are concerned as French President Emmanuel Macron has called for new sanctions and said there were clear indications Russian forces had committed war crimes. Adding to the euro’s woes, Christian Sewing, President of BDB – Germany’s top bank lobby – warned on Monday that the German economy would face a big recession if there were a halt on imports or delivery of Russian gas and oil. Offering some form of support to the suffering euro, European Central Bank governing council member Klaas Knot said on Monday that the ECB should act in the face of high inflation and that gradual but timely normalisation of policy is needed.


With talk of increased sanctions on Russia, the dollar has benefited from demand in a risk-sensitive market. The dollar gained for the third straight session as investors sought safety in the greenback, with the dollar index higher by nearly 0.5%. Demand for the dollar, combined with buoyancy following the strong payrolls report on Friday, has increased expectations for a 50 basis points rate hike at the next Federal Reserve meeting in May. Despite the US Commerce Department reporting yesterday that factory orders fell 0.5% in February, the market seems more focused on Wednesday’s release of FOMC Minutes and US Services PMI’s released today. The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector and is expected to post at 58, indicating an outperformance from the US economy as the prior figure was 56.6. A series of speeches from Federal Reserve members today will also be closely scrutinised for any hint of sentiment on monetary policy.

Economic Calendar

13:30 USD Goods and Services Trade Balance (Feb)
15:00 USD Fed’s Brainard speech
15:00 USD Fed’s Kashkari speech
15:00 USD ISM Services PMI (Mar)
19:00 USD Fed’s Williams speech