Good afternoon,

Yesterday saw the major currencies gain back some ground against what seemed to be the ever-strengthening US dollar. The cable recovered back towards 1.3200 at the close of the day after breaching 1.3100 earlier in the day. EUR/USD had its largest single-day gain in nearly six years in a move back to 1.1090 after opening the day at 1.0920.

A meeting between Ukraine and Russia’s foreign ministers agreed in Turkey for Thursday and easing oil prices seemingly took some panic out of the market. EUR/USD has consolidated those gains at 1.1050 in the lead up to the ECB’s policy decision due this afternoon.

The ECB is the first central bank to meet during the current political tensions. ECB President Christine Lagarde will release the interest rate decision and policy statement this afternoon, which the market will be watching closely as they look to balance inflation risk with slowed economic growth due to the war. With rising commodity costs and risk of recession, expect a nod to the uncertainty in the market and to have little guidance on future interest rates to allow them to pivot accordingly going forward.

The pound should continue to be monitored. Any downside risk on GBP/USD for UK importers should be considered as not only US dollar strength – through an expectation for the US Fed’s first interest rate hike in March, which is contributing to a stronger dollar – but also vulnerability to rising oil and gas prices at their fastest rate in over a decade begins to filter through to the consumer.

Have a great day.

Chris Allan, Senior Relationship Manager

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