Gentium FX | Daily Report - 25th February 2022 - Safe-Haven Currencies Strengthen After Ukraine Attack

Sterling has performed well given the circumstances with the heavy sell-off in the European equity market yesterday. UK equities are heavily exposed to the Oil and Gas sectors both of which have come under a lot of pressure in the last few days given links with Russia. A surge in gas prices suggests that UK CPI should peak higher than expected. The Bank of England will be aware of the current market conditions so focus should return to macro-tightening and interest rate decisions.

On the Euro front, the west has so far refrained from banning Russia from the SWIFT payment system and Russian energy sector in the first round of sanctions against Russia. Fears of a slowdown in the global economy have at least eased for now. Ukrainian President Zelenskyy stated that Russian troops had stopped advancing in most directions. The Euro seems to be holding up well for the time being. We await any European Central Bank commentary on whether events in the Ukraine will delay the ECB’s exit from stimulus in a speech at 14.00 PM from ECB President Lagarde.

The currency markets are slightly calmer this morning as the world comes to terms with the breakout of war in Eastern Europe. The US Dollar along with the safe haven currencies such as the Japanese Yen and Swiss Franc strengthened through the day yesterday. The US Dollar should hold onto its strength for now with uncertainty still high. Away from the Ukraine, the US docket will focus on data releases on personal income and inflation data. This will go some way to determining whether the Fed will hike interest rates by 25 bp or 50bp next month