Daily Market Update 24/01/2022

 Main Headlines

The US ordered family members of its embassy staff to leave Ukraine on Sunday because of the threat of “significant military action” against the country by Russia. The state department said in a statement that all US citizens should consider departing immediately for security purposes as conditions, particularly along Ukraine’s borders, in Russia-occupied Crimea, and in Russia-controlled eastern Ukraine, are unpredictable and can deteriorate with little notice. Non-essential US government employees have the option to leave Ukraine if they wish. The warning came after weeks of mounting tension along the eastern border of Ukraine, where Russia has amassed more than 100,000 troops. Meanwhile, Russia warns of “unpredictable and grave consequences for EU security” if the US does not concede Russia’s demand to roll back NATO’s expansion.

Airlines will be forced to fly more regularly this summer to retain their take-off and landing rights at UK airports, in a sign that ministers expect a rapid recovery in air travel in the coming months. The leaders of seven of the biggest airlines serving the UK have asked the health secretary to assure travellers there will be no further “knee-jerk universal testing or hotel quarantine” in response to future Covid variants. Previously placed restrictions were eased earlier this month, but arrivals from every foreign country must take a test on the day of return or one of the two following days. Airlines call for “restriction-free international travel, at the very least for the fully vaccinated,” including an end to post-arrival tests. The aviation industry in the UK has been hit far harder in any other major European nation, with international departures last year just 29 per cent of 2019 levels.

Markets

GBP

Sterling is weaker against the dollar and euro this morning. Families across the UK are facing a squeeze at the minute amid rising inflation as the cost-of-living crisis grips the country. Boris Johnson was accused on Sunday of failing to investigate allegations of Islamophobia within his government by a former minister, deepening the civil war engulfing the Conservative party. Meanwhile, Johnson is “determined” to fight on and still does not believe that he broke any lockdown rules as he braces himself for Sue Gray’s imminent verdict on parties in Downing Street. British business activity cooled unexpectedly this month to an 11-month low, but cost pressures stayed high, according to a survey that leaves the Bank of England on track to raise interest rates next week. Britain’s education minister Nadhim Zahawi said on Monday he still supported a tax hike due to come in from April, after a media report suggested that Prime Minister Boris Johnson’s ministers would back a delay.

EUR

EUR is feeling the pressure against most major currencies overnight. Italy’s parliament will begin voting on Monday for a new head of state, with Prime Minister Mario Draghi among the most prominent candidates in a wide-open contest which will be closely monitored by financial markets. Activity in Germany’s services sector rose to a two-month high of 52.2 after shrinking in December, confounding a forecast that had pointed to a decline and pointing to a positive mood among consumers and business despite the impact of the Omicron coronavirus variant. French business growth dipped by more than forecast in January compared to December, according to initial estimates in a monthly survey, as the impact of COVID-19 and inflationary pressures weighed on activity. Meanwhile, in Brussels, tens of thousands of people protested on Sunday against COVID-19 restrictions, some clashing with police who fired water cannon and tear gas to disperse them near the European Commission’s headquarters.

USD

The dollar is stronger than most major currencies in the early morning trade. Fears are growing that action by the US central bank to combat high inflation will trigger a fresh debt crisis, as it emerged poor-country repayments to creditors are already running at their highest level in two decades. Former Treasury Secretary Lawrence Summers says he remains concerned that policy makers are complacent about inflation, and he doubts US inflation will return to the near 2% range by the end of this year. The White House is set to hold the second meeting of its Competition Council on Monday, federal agencies said on Sunday. The US House probe of the deadly assault on the Capitol will share with federal prosecutors any evidence of potential crimes aimed at pushing phony Republican electors in states won by Democratic President Joe Biden, the committee’s chairman said on Sunday. Firefighters gained greater control of a wildfire that closed northern California’s scenic coastal highway and threatened a famous bridge, although about 500 people stayed under evacuation orders.

Ballinger & CO. Morning Report- 24th January 2022

Today’s Rates

GBP>EUR – 1.1949

GBP>USD – 1.3535

EUR>USD – 1.1324

GBP>CAD – 1.7050

GBP>AUD – 1.8918

GBP>SEK – 12.455

GBP>AED – 4.9711

GBP>HKD – 10.535

GBP>ZAR – 20.545

GBP>CHF – 1.2338

  Today’s Calendar           

·      9:15 a.m.: France Markit Jan. PMIs

·      9:30 a.m.: Germany Market/BME Jan. PMIs

·      10:00 a.m.: Euro area Markit Jan. PMIs

·      10:00 a.m.: Poland Dec. retail sales

·      10:30 a.m.: U.K. Market/CIPS Jan. PMIs

·      Argus Americas Crude Summit in Houston

·      EU foreign ministers meet in Brussels

  Today’s Highlights

·       Forex Today: PMI data to kick start the Fed week

·       EUR/USD Forecast: Euro stays on the back foot to start the week

·       GBP/USD seesaws around 1.3550 on UK’s political, Brexit risks ahead of PMI data

·       USD/CNH expected to challenge 6.3300 in the near term – UOB

 (https://frank-exchange.com/)

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