By Ashley Finill
Russian conflict brings further sanctions
It’s been nearly two weeks since the Russian invasion of Ukraine. The Ukrainians are holding up a strong resistance with the Russian army expecting to take the capital of Kyiv within a couple of days. Throughout these weeks world leaders have imposed sanctions on Russia to deter them for war and try to settle differences the democratic way but to no avail from the Kremlin. Putin’s war machine continues to roll on, but this has brought on more sanctions and distance from the country. This is very likely to have an adverse effect on not only the Russian economy but globally too. Russia is the main gas supplier of the EU and also supplies it to the UK and yesterday the UK and US announced they will stop using Russian oil. The knock-on effect being petrol prices in the UK have been increasing at record levels, petrol forecourts are now displaying prices at as high as £1.71 per litre, this will further squeeze people’s pocket in the UK with gas and electricity, food and other commodities also sharply rising in price. These price increases will add to the growing inflation in the UK and could impact Sterling over the coming months. This could force the hand of the bank of England to increase interest rates in the UK again but there has been no word from the monetary policy committee or the BoE governor Andrew Bailey at this time, but there is a meeting being held this month on the 17th which will give more insight.
Sterling’s reverses against the Euro
Last week saw Sterling make considerable gains on the weakening Euro as it hit new highs not seen since 2016. However, these gains were short lived as the pound has now dropped 2 cents against both the dollar and the Euro in the last 24 hours. This demonstrates how fragile the Pound can be against the majors and its gains reversed at a moment’s notice. The dollar continues to be the strongest performing currency as it reaches a two year high against both the Euro and Sterling. This is likely due to the Russian conflict as in times of uncertainty the US Dollar is seen as the world’s safe haven currency. There’s no question that the currency market is at its most volatile in nearly a decade which can put our clients in an uncertain and confusing position when needing currency in the coming weeks/months for their property purchase. However, we have several options to help you not get caught out in these unpredictable times. Our most popular option is a forward contract, this allows you to secure your currency in full for a future settlement with only a 10% deposit. The remainder would then be settled when the contract ends, doing this secure the rate of exchange at today’s rate and eliminates the risk of the rate going against you and giving you peace of mind knowing what you have budgeted for on you new property purchase. To find out more information on this contact your currency consultant for information and friendly professional guidance.
Remaining Data this week
Today is a quiet day on the data front but tomorrow we see more notable releases throughout the day. Starting with the EU at 12.45pm as the European Central Bank meet to decide on whether to increase their interest rate, although this is not expected if there is a hint at future increases at their press conference that follows at 1.30pm then we could see further losses for the pound against the Euro. Later in the US Consumer Price Index (inflation) and jobless claims are posted at 1.30pm, finishing tomorrow’s data releases the US post their monthly budget statement at 7pm. On Friday the UK release GDP, industrial and manufacturing production early doors at 7am and later in the day the NIESR GDP estimate will also be release in the UK. In the afternoon Canada release the rate of unemployment in the country and finally at 3pm in the US Michigan Consumer sentiment index. A busy end to the week which is likely to see further movements in the currency market. Call you currency consultant today to stay ahead of any surprises and so you are not caught out on the unforgiving market.