By Simon Eastman
Yesterday we saw sterling start on the back foot as the concern over Russia and Ukraine escalated, with tanks seen moving across into Ukraine.
As President Putin publicly recognised the two breakaway republic states, Luhanks and Donetsk, stating he was moving in troops as a peacekeeping envoy. But this move was seen as further antagonising the West to see what they might do next, in the cat and mouse game.
What the UK did was imposed sanctions on 3 wealthy oligarchs plus a handful of Russian banks, but given the 3 have been blacklisted by the US for many years and all the banks were minor players, some argued, was it too little. The EU and US both followed suit, making similar sanction gestures on some banks, again with opposition like the Republicans in the US calling the move, not enough to cause issue to a country like Russia, with very low national debt and vast foreign currency reserves, any small financial sanctions may not have much effect. The fact Germany has said they will not sign off the Nord Stream 2 pipeline, would surely affect them more than Russia when the price of their gas goes up, as one commentator pointed out.
As the day rolled on, the pound seemed to make back some of its losses as Boris Johnson confirmed he would call an end to all Covid restrictions in the UK from tomorrow, including not having to isolate if you have Covid-19. Scotland followed suit, although it has kept isolation in place and some other legal measures are now just guidance.
Yesterday was light on data, with just the US Markit manufacturing and services PMI of note, which came out as expected.
Today is made up of a few central banker speeches, with the ECB’s Elderson speaking at 9.15am, and De Guindos at 11.30am.
The main point for today is the Bank of England’s Monetary Policy Report hearing at 9.30am alongside a speech from BoE chief Andrew Bailey, where traders will eagerly listen to any talk of direction for future UK interest rates. This could be a market mover for sterling, so make sure to keep in touch with one of our currency consultants with friendly guidance on any upcoming currency exchange.