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Market Update

Sterling edged higher versus the euro this morning, with investors focusing on the Bank of England’s next moves to tame inflation while avoiding recession risks.

The pound lost ground against a strengthening dollar as concerns about a prolonged war in Ukraine boosted demand for safe-haven assets.

Bank of England Governor Andrew Bailey will give a speech later today; Deputy Governor Ben Broadbent will speak on Wednesday.

We will be paying close attention to any clues around how the Monetary Policy Committee may balance the need of bringing inflation down to its 2% target against avoiding an economic downturn.

Recent policy updates from the BoE and Fed kept downward pressure on Sterling as the BoE’s last monetary policy meeting signalled more caution over plans for further policy tightening. But from now on, the market reaction might not follow the usual path in which the pound strengthens when rates rise.

This is the second consecutive meeting where the BoE has hiked rates with a tinge of regret and goes to heart of why we think UK rate hikes may not necessarily be constructive for the pound.

Putin has now demanded that payments should be made in Ruble in hopes to prop up his currency which has suffered hugely due to the current war.

Both Powell and Lagarde speak later today with not much volatility expected from these events.

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