Global Tensions bullying currency moves globally

Global events will be overshadowed by the tensions brewing over Ukraine – if we see an escalation, there will likely be a flight to safety in markets which traditionally sees buying of USD and safe havens such as the Swiss Franc & JPY. As this has potential to be a ‘European’ conflict, it will be interesting to see the reaction of the €€, which has struggled to rally despite recent ECB comments.

 GBP: Decent Manufacturing data was matched a MUCH better than expected Services data his morning - adding to a raft of encouraging statistics from the UK which is very close to removing all Covid restrictions. GBP/EUR maintaining the 1.2000 level, and GBP/USD is much higher, trading near 1.3625 – the highest level since mid-Jan.

 The Bank of England has signaled a 0.5% increase in interest rates at its 17th March meeting – any indication that this will NOT be delivered (or delivered with a dovish tone) will likely cause GBP to suffer in the medium-term.

 EUR: Disappointing Manufacturing data this morning will hamper any rally in the shared currency. Although the data showed an expansion, it was lower than expected and €€ is pressured by the prospect of war in Ukraine – EUR/USD continues to retreat from nearly 1.1400 levels. German data published tomorrow and Friday will be the biggest movers of the week.

 ING Bank reiterates it’s concerns that NOK and SEK are vulnerable to weakness if tensions continue to rise in Ukraine

 USD: Has dipped after recent safe-haven buying, as Biden seeks to calm tensions between Ukraine and Russia. The key Federal Reserve interest rate decision on 15 / 16 March is expected to deliver a 0.5% rate increase (according to HSBC), but this could be significantly influenced by the threat of war in Europe.

 We have a light data calendar this week, and the US is on holiday today for President’s Day. Annualised GDP published on Thursday will be the biggest mover.

 New Zealand: The latest developed economy hiking interest rates (Wednesday morning), expected to increase rates by 50 basis points this week, alongside indications of future hikes and a shrinking of the balance sheet. This is likely to boost the NZD over the medium term.

GBP/USD         1.3625

EUR/USD          1.1360

GBP/EUR         1.2000

EUR/CAD          1.4475

EUR/NOK         10.20

EUR/SEK          10.62