- Pound (GBP) rises ahead of a quiet session
- UK public sector swings into surplus
- Euro (EUR) gives back small gains after German business sentiment improved
- German GFK consumer confidence data due
The Pound Euro (GBP/EUR) exchange rate is heading higher paring losses from the previous session. The pair fell -0.26% on Tuesday, settling at €1.1990, after trading a 100 pip range from a low of €1.1933 to a high of €1.2033. At 05:45 UTC, GBP/EUR trades +0.09% at €1.2001.
The Pound experienced high levels of volatility as Russian, Ukraine headlines continued to dominate risk sentiment in the financial markets.
On the data front UK public sector net borrowing swung into surplus in January of £2.9 billion, boosted by tax receipts as the economy re-opened following lockdown. According to the Office of National Statistics this was the first time since the start of the pandemic that the public sector received more than what it spent. However, the surplus was slightly below expectations.
Separately, Bank of England policy maker Ramsden adopted a more hawkish tone boosting the pound from session lows. Ramsden said that the BoE may need to raise interest rates slightly more over the coming months. However, he added that the longer-term picture was harder to decipher due to uncertainties including the Russia -Ukraine conflict.
The next BoE monetary policy meeting is on March 17th. Financial markets expect BoE interest rates to rise to 2% by the end of the year.
The Euro pushed higher yesterday boosted by upbeat German IFO business sentiment data. Business morale hit a 5-month high in February. The business confidence index rose to a higher than expected 98.9, up from 96 in January. This was well ahead of economists’ forecasts of 96.5. However, it is worth noting that the survey was carried out before the most recent escalation in Russia, Ukraine tensions.
Russia, recognized the independence of two separatist occupied states in Ukraine and then swiftly moved troops in. The euro initially fell sharply lower on the news before recovering and pushing higher.
Today Russia headlines will remain in focus in addition to German GKK consumer confidence, which is also expected to improve.
