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  • richard evans

BoE raises rates, focus back on Ukraine

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend.

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 27th when we change our clocks in the UK

US equities had another good day yesterday, although European exchanges have opened pretty flat this morning. Currency markets are not too far away from levels seen this time yesterday, GBP a touch weaker despite BoE raising rates 25bps yesterday. One member did vote to keep rates unchanged, giving a slightly dovish feel, certainly compared to the Fed where not only the decision to raise was unanimous, one member wanted to see a 50bps rise. GBPUSD now 1.3140.

EUR has had a reasonable run, holding gains against the USD and pushing slightly higher against GBP. EURUSD now 1.1065, EURGBP 0.8420 (GBPEUR 1.1875), while EURJPY is up at 131.45 having tested the high 131s a couple of times in the past few hours.

With Fed and BoE now having raised rates as widely expected, we’ll likely hear from members of each in the coming week or two which may give us more of an idea of their future thinking,. Really the Fed has set its stall out, with a string of 25bps rate rises expected this year, BoE still looks for higher rates but is a little less hawkish.

Obviously Ukraine remains firmly in the spotlight. Putin has laid out his demands which, unless I am very much mistaken, are similar to those he sought before his invasion began, namely Ukraine agreeing to not join NATO, giving the Donbas region to Russia, and agreeing that Crimea is officially part of Russia having been ‘annexed’ by them back in 2014. Whether these are acceptable to Ukraine I really don’t know, but the NATO issue and the Donbas region I reckon can be agreed fairly easily. Crimea is a slightly different issue but the reality is Ukraine and the rest of the world are not going to kick Russia out of there so I would expect there to be some sort of agreement, perhaps falling short of a complete legal handover of the region.

Whether these demands are worth all the bloodshed and destruction is up for debate. Whether any peace agreement would also see the easing of sanctions on Russia is also a key question. The issue of Russian gas supplies to Europe must still be on the agenda as well. But we are still getting a bit ahead of ourselves with talk of peace. Russia continues to strike Ukraine with bombs and missiles, seemingly targeting both military and civilian areas, while the West is supplying Ukraine with weapons to defend itself. Russia seems to be making very slow progress which, while it makes for good Western propaganda, will only encourage Russia to use more destructive force.

Biden meets Chinas Xi later today. So far China have stayed quite well out of the Ukraine situation. They did voice some support for Russian actions but have also said they would like to see peace and as far ass we know have not yet given Russia any support, financial nor military. Not sure that Xi is really likely to listen to anything Biden has to say but in the current geopolitical climate it is good the two sides are at least talking.

Onto the weekend, the weather looks like it should stay dry and indeed next week it is forecast we should see temperatures up near 20 degrees. Lovely. We’ll be able to turn the heating off just in time for energy prices to rocket. Before then, Saturday sees the deciding fixtures in the rugby six nations, Spurs take on West Ham in what used to be known as a ‘six-pointer’ but I rarely hear that phrase these days. The highlight though will be Sunday morning when my U15s once again take on a team in the division above us in the quarter final of the last cup competition we are in. It would be nice to get through this despite the fact it would make it even harder for us to fit in our remaining league matches. I’ll report back Monday, in the meantime have a great weekend

- 10.00 EU labour costs, trade balance

- 12.30 CAD retail sales, new house prices

- 13.00 Biden/Xi meet

- 14.00 US existing home sales

- 18.00 Feds Bowman speaks

- 19.30 CFTC position data

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