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Russia and Ukraine tensions ease

Daily Currency Update

Russia and Ukraine tensions have eased in the past 24 hours after Russia announced it had pulled some troops back from Ukraine’s border. The Russian defence ministry published footage showing troops returning to base after exercises, but the significance of the move has come under doubt as Ukraine suffered a cyber-attack shortly after. German Chancellor Olaf Scholz did further ease markets’ minds by stating that diplomatic options are far from exhausted after his meeting with Russian leader Vladimir Putin. The news has supported investor’s risk appetite and seen the US dollar weaken. Investors tend to move towards the US dollar during riskier climates.

UK CPI fell slightly on the month in January, down 0.1%, but the annual figure remained elevated at 5.5%. The news released earlier this morning and now suggests that pressure remains on the Bank of England to lift interest rates in the months ahead. Sterling now sits back above 1.3560, after touching a Tuesday afternoon low of 1.3490 against the US dollar. GBP/EUR sits closer to 1.1900. Easing tensions between Russia and Ukraine have supported the EUR.

Key Movers

German ZEW data disappointed yesterday after coming in under expectation and less than the previous figure. Today Europe is due to release industrial production data for December. EUR/USD has been edging higher in the past 24 hours and has touched 1.1390 at the highs.

Yesterday US producer price index showed wholesale prices rose 1% month-on-month. Today the focus is likely to be on the minutes from the Federal Reserve’s last meeting, where policy makers likely debated how quickly it should tighten monetary policy in the months after March. Market predictions have been increasing on a 0.50% interest rate hike with 0.25% all but expected. Any further indicators on the larger of the two could add volatility to an already volatile USD. The FOMC meeting minutes are due to be released at 7pm this evening.

Expected Ranges

  • GBP/USD: 1.3490 - 1.3630 ▲
  • GBP/EUR: 1.1880 - 1.1970 ▼
  • GBP/AUD: 1.8810 - 1.9040 ▼
  • EUR/USD: 1.1290 - 1.1450 ▲