• richard evans

Waiting for Putin's next move

Good morning


Ukraine continues to dominate the headlines as the West announce sanctions on Russia with more to follow should Putin mount a full invasion. Bidens proposed summit with Putin won’t go ahead, neither will Blinkens meeting with his counterpart Lavrov. The world sits and waits to see what Putins next move will be.


We have had a bit of a turn in the financial markets, US dollar is actually a little weaker than this time yesterday and those safe haven currencies such as CHF and JPY are also a little weaker. EURUSD is up to 1.1340, GBPUSD to 1.3615, EURGBP 0.8330 (GBPEUR 1.2005). These moves suggest markets are not expecting Russia’s ‘peace-keeping’ to escalate into a full-blown invasion. I’m not so sure.


RBNZ did raise rates 25bps to 1% as expected, they did raise their inflation forecast and now see rates at 3% by Q4 2023. NZD did rally after the announcement, up from 0.6735 to 0.6790, while AUDNZD fell from 1.0730 to 1.0675.


ECBs Holzmann was pretty hawkish, suggesting ECB could raise rates before ending bond purchases, with a possible increase this summer and another by the end of the year. We have a couple of other ECB officials speaking today, lets see if they offer anything to support Holzmann’s comments.


I’ve seen a forecast from UBS that sees GBP appreciate against USD and EUR this year, with 1.50 and 0.8000 (GBPEUR 1.2500) possible targets. Quite a call, and one that is not shared by all, but worth bearing in mind. We hear from BoE officials today at the monetary policy report where we look for any signs that the BoE supports market expectations that rates will reach 2% over the coming year.


I have to say that if we were to see such a move in GBP, our USD and EUR purchase programs would really shine compared to other products such as straight forwards. No one ever wants to sell GBP at the lows but with our programs you know that your initial rate will improve over time should we see such a move, which means you remain competitive and hopefully profitable. You also know that balance sheet impact will be limited, a major consideration that is often overlooked when entering longer term forward positions. So I can safely say, I have no problem with our program buying US dollars at current levels, and would be pleased to see a move higher, safe in the knowledge that our rates will improve even if GBP does subsequently rise.



- 09.15 ECBs Elderson speaks

- 09.30 BoEs monetary policy report

- 10.00 EU HICP

- 11.30 ECBs de Guindos speaks

- 17.00 BoEs Tenreyro speaks


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