Market Update 23rd February 2022

Good morning from us here at CCM, here is your Wednesday market breakdown.

Investors remain tentative this morning as the market continues to focus on the geopolitical tensions faced in Russia and Ukraine. The improved mood seen late in the session Tuesday soured as both the US introduced sanctions against Russia. The market softened today however, but remains relatively quiet this morning, and continues to trade in the margins we’ve seen in the last week.?

GBPUSD trades above 1.36 this morning, and after defending the price early in the session, the cable has now creeped up to 1.3610 at the time of writing. The marginal gains seen here were pushed along by the improved market sentiment this morning, but any further gains aren’t foreseen after the Monetary Policy Hearing this morning. Governor Baileys direct claims that there is a ‘two-sided risk’ to inflation. He said further that increasing interest rates will add to unemployment and slow growth. An intriguing outlook ahead of the expected March hike, with a rise to 1% now unlikely, with a .25% rise to 0.75% seeming more realistic. The pair wait on further news from Ukraine to dictate where it will move next.

The Euro gain against the dollar this morning can be attributed to the improved market sentiment. The 10-year US Treasury Bond yield declined for the fourth straight day as the Euro capitalises on the lack of dollar interest. The pair trade at the middle of 1.13 and were aided in no small part from hawkish comments by ECB’s Board member R.Holtzmann, who did not rule out hiking rates before the current bond-buying programme finishes. He suggested a rate rise by the summer and another potential one towards end of the year.

Hawkish Eurozone speeches, coupled with the splinters felt from the fence sat on by the BoE this morning, is likely to have seen the downturn in GBPEUR prices today. The pair have fell below 1.20 and trade at the top of 1.19 today. Hinged on the geopolitics, gains will also be capped similarly to other key pair prices. The Euro bounce may be due to the fact investors have locked onto an increase in the German IFO current assessment index released yesterday. This rise is indicative that across the board the Eurozone is recovering well from the pandemic, but any talk of a major recovery is likely to be halted at least until some sort of conclusion is reached in Russia.

A situation thus that is changing all the time, an eye must be kept on the news from Ukraine and Russia, as this controls the market for the moment.?