A dark day for Europe

Daily Currency Update

All eyes are on the situation in Russia and Ukraine this morning, as some media outlets have described today as a 'dark day in Europe' and the 'worst geopolitical situation in Europe since the second world war'. Russia has done what the market had dreaded and started military action in the Eastern parts of Ukraine and with this, markets have tumbled. Oil prices are testing $100 a barrel while major stock markets are down multiple percentage points. The US dollar remains on the front foot with global risk aversion, while currencies including the euro and pound sterling are under severe pressure.

On the monetary policy front, Bank of England Governor Bailey pushed back against current market expectations of aggressive tightening from the Bank of England. He noted that the “key message to markets was not to get carried away” regarding the path of interest rate hikes. However, he also noted that there remained upside risks to already very elevated inflation forecasts in the UK.