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Market Update

• Posted by Shyam Gokani in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Sterling, UK, Uncategorised
• February 28, 2022
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The focus for exchange rates is currently the ongoing tensions between Russia & Ukraine- over the last few days we saw these tensions escalate after Russia began an invasion of Ukraine on February 24th- this kicked off a knee jerk reaction which saw many assets sell-off and investors flee to the Dollar (As you would expect).

Over Friday, we saw the markets begin to regain some stability with GBPUSD rising around 2%- however, GBPEUR managed to dip below the 1.19 area showing some demand for the Euro from investors.

After a weekend of sanctions being placed- including a few Russian banks being taken off the SWIFT payment system- this will almost certainly cause major weakness in the Russian Ruble on Monday, and we expect the Russian stock markets to fall further today.

Some analysts believe that markets have now fully priced in what is happening with Russia & Ukraine, we believe that it is still too early to say, and situations like this are way too unpredictable to even attempt. Until we have seen a real resolution, we think there is still plenty of uncertainty and risk to be priced into the markets.

As we enter March- this will be another volatile month for markets- with rising inflation still being a big factor alongside geopolitical risks- it seems the BoE is still set on a rate hike for March, but the bigger story will be the Fed- the current expectation is for QE to stop, and interest rates to go up by 50bps- with all that is going on- I am unsure whether we still get such a large hike from the Fed, but a hike is priced in none the less.