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Sterling drops to lowest level against the dollar since November 2020

Lawrence Kaplin
Lawrence Kaplin 11 March 2022

GBP: Falls to new low against dollar

EUR: ECB talks up normalising policy but economic woes limit upside

USD: Dollar gains further as risk sentiment continues to sour

Sterling 

With no data releases yesterday the pound movements were being dictated by its currency peers.

This morning, GDP outlined a positive growth of 0.8% within the UK economy in January, however, markets were non-reactive as they await the results of Russian sanctions on the economy. The pound this morning has sunk to new lows against the dollar as the dollar has benefitted from further safe-haven flows as the Russia-Ukraine crisis continues and a no headway made in the talks in Turkey yesterday.

Euro

The euro found some limited support yesterday after the ECB meeting, where ECB President Lagarde spoke of the ECB’s aim to conclude its normalising policy by the end of Q3 and the first rate hike expected shortly after. However, this hawkish tone was offset by talks of slower growth in the Eurozone as economists foresee a possible recession in the eurozone as it could take as long as three years to wean off Russian oil and gas reliance. Furthermore, the lack of any positive outcome from the Russia-Ukraine talks saw the pressure back on the single currency.

With no data releases today, the ongoing conflict will continue to dictate the market.

USD

US CPI hit 40-year highs yesterday, putting immense pressure on the Fed to try and ease inflation which seems to be heading towards a worrying 10% figure. The current interest rate hiking path will likely be reviewed as the Fed will be seen to be lagging behind the curve. This should provide further support to the already strong dollar. Furthermore, the dollar has seen further inward flow as risk sentiment continues to sour due to the ongoing conflict and following the announcement from the US that they ain to place Russia in the same list as Cuba and North Korea and cut them from “Special trade terms”. This follows news of major companies pulling out of the region, including McDonalds, Coca-Cola and Starbucks.

Elsewhere

Japanese Yen hit five-year lows against the dollar from early morning risk-off flows.

Market rates 

Today's Interbank Rates at 10:25am against sterling movement vs yesterday.

Euro

€1.191

US dollar

$1.307

Australian dollar

$1.787

South African rand

R19.71

Japanese yen 

¥152.8

Have a great day.