Daily Market Update 26/01/2022

Main Headlines

Joe Biden has said he will consider personal sanctions against Vladimir Putin if Russia invades Ukraine, as western leaders step up military preparations and make plans to shield Europe from Russian gas being cut off. The rare sanctions threat came as NATO placed forces on standby and reinforced eastern Europe with more ships and fighter jets in response to Russia’s troop build-up near its border with Ukraine. Russia denies planning an attack and says the crisis is being driven by NATO and US actions. It is demanding security guarantees from the west including a promise by NATO never to admit Ukraine as a member. Moscow sees the former Soviet republic as a buffer between Russia and NATO countries. At the same time, Biden told reporters he has “no intention” of dispatching US troops to Ukraine, and spoke of severe economic consequences, depending on what Putin decided to do. The threat of sanctions on Putin came as the US helped prepare for the diversion of natural gas supplies from around the world to Europe if the flow from Russia is cut, to blunt Putin’s most powerful economic weapon.

Boris Johnson is braced for the most perilous 48 hours of his premiership for the imminent publication of an inquiry into rule-breaking Downing Street parties after he had spent the day in talks with allies and Conservative MPs plotting a fight for political survival. Exasperated Conservative MPs are now due to see an official report into Downing Street parties that has now triggered a criminal inquiry. Cressida Dick, the Metropolitan police commissioner, announced on Tuesday that her officers are investigating allegations of law-breaking at the heart of government based on evidence unearthed during an inquiry by the senior civil servant Sue Gray. Grey’s investigation could be published as soon as this afternoon. Gray’s report is due to be scrutinised by Johnson’s critics, who are weighing whether to launch an effort to oust him. Johnson has told colleagues he will fight to save his job and is expected to use the publication of the Gray report to announce a shake-up of his Downing Street operation. One Tory MP said: “It’s not so much what is in the Gray report but how he responds to it.”

Markets

GBP

Sterling is stronger against euro and weaker against the dollar this morning. Britain is not ruling out sanctions targeted at Kremlin chief Vladimir Putin in person if Russia invades Ukraine, Foreign Secretary Liz Truss said on Wednesday. British manufacturers expect to raise prices by the most since 1977 over the next three months, as they wrestle with serious labour shortages and the biggest increase in costs since 1980. The Confederation of British Industry (CBI) data look set to reinforce the Bank of England’s fears that high inflation is getting baked into businesses’ pricing plans, bolstering the chances it will hike interest rates again next week. Meanwhile, Britain’s government looks firmly on track to borrow less this tax year than forecast but surging inflation will soon curb any leeway for finance minister Rishi Sunak who is under pressure to ease a cost-of-living squeeze. England will on Thursday ditch mask mandates and COVID-19 vaccine passes introduced to slow the spread of Omicron. Prime Minister Boris Johnson has credited the success of Britain’s booster rollout and the lower severity of the variant as he aims to live with COVID-19.

EUR

Euro is weaker than most major currencies in the early morning trade. Ukraine is committed to seeking a diplomatic solution to the current tension with Russia, its ambassador to Japan, Sergiy Korsunsky, said on Wednesday, adding that he saw little chance of all-out war, although there might be smaller conflicts. European businesses and households are facing gas prices that have more than quadrupled since last year. This can be indefinitely frustrated if European leaders do not end their dependence on fossil fuels. The gas price crisis and rising geopolitical tensions between Russia and Ukraine have re-emphasized that Europe needs a safe local supply of renewable energy and reduces gas consumption. Bulgaria reported a record 12,399 coronavirus infections in a single day on Wednesday, official data showed, with most of the cases caused by the more contagious Omicron variant. Meanwhile, the Dutch government has announced that bars, restaurants, museums, theatres, and other venues are to be allowed to re-open under conditions, loosening some of the toughest COVID-19 restrictions in Europe.

USD

The dollar is well bid against most major currencies overnight. The FOMC will almost certainly signal a March rate increase after its meeting today. The question is whether Jerome Powell will indicate if a 50-bps hike is in the cards. Brent crude edged up on Wednesday as geopolitical tensions in Europe and the Middle East raised supply concerns while investors locked in profits ahead of updates from the US Federal Reserve and US oil inventory data. Oil prices hit seven-year highs last week on worries that supplies could tighten due to Ukraine-Russia tensions. New York state has seen an 86% decrease in Covid-19 cases since its January 7 peak, though deaths and hospitalizations remain elevated. Hospitalized patients who survived at least a week after being discharged were more than twice as likely to die or be admitted again within months, a study found. In the meantime, Republicans in New York reacted furiously on Tuesday after state officials told school administrators to continue enforcing a mask mandate for students and teachers despite a judge overturning it, causing confusion as some districts rushed to make masks optional

Ballinger & CO. Morning Report- 26th January 2022

Today’s Rates

GBP>EUR – 1.1959

GBP>USD – 1.3498

EUR>USD – 1.1286

GBP>CAD – 1.6982

GBP>AUD – 1.8841

GBP>SEK – 12.503

GBP>AED – 4.9575

GBP>HKD – 10.508

GBP>ZAR – 20.476

GBP>CHF – 1.2424

  Today’s Calendar           

·      8:00 a.m.: Sweden Dec. PPIs, trade balance

·      8:00 a.m.: Denmark Dec. retail sales

·      8:45 a.m.: France Jan. consumer confidence

·      4:30 p.m.: EIA crude oil inventory report

·      5:00 p.m.: Russia Dec. PPI

·      FOMC rate decision and Fed chair news conference

·      WEF releases its annual Global Competitiveness Report

·      Fitch Solutions webinar on The Year Ahead for Mining & Metals 2022

·      Switzerland Credit Suisse survey expectations

  Today’s Highlights

·       Forex Today: Dollar rally loses steam as focus shifts to Fed

·       EUR/USD Forecast: Bears to remain in control as 1.1300 resistance stays intact

·       GBP/USD eases to 1.3500 amid Brexit concerns, ahead of Fed

·       Bank of Canada Rate Decision Preview: No surprises for a 25bps rate hike 

 (https://frank-exchange.com/)

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited/Manor House Foreign eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result. Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.

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