EUR

The euro recovered on Tuesday, but volatile market conditions look set to remain as Russia moves into Ukraine. The euro and global stock markets fell sharply following overnight news that Russia would recognise two contested territories in eastern Ukraine as sovereign states and would deploy its military in due course.

The move was condemned by Western capitals who promptly promised sanctions. Global stock markets soon overturned a deeply negative start to go sharply higher on Tuesday while the Ukraine-sensitive euro flipped losses against the dollar, Sterling and a host of other currencies.

The UK, US and EU announced sanctions over the course of the day but the extent of the measures proved limited. Western countries look to maintain an arsenal in the event of an all-out war. The two key questions now are how far Putin’s actions will go and what further sanctions will be placed on Russia.

USD

The US is set to unleash a wide array of sanctions against Russia if Moscow escalates the conflict in Ukraine, denying key Russian financial institutions and companies access to US dollar transactions and global markets for trade, energy exports and financing. Until now the US and its allies have never before attempted to cut a $1.5 trillion economy out of global commerce.

Under an executive order signed by President Joe Biden on Monday, any institution in Russia’s financial services sector is a target for further sanctions, the White House said, noting that more than 80% of Russia’s daily foreign exchange transactions and half its trade are conducted in dollars. Biden was also quoted saying he would “take robust action to make sure the pain of our sanctions is targeted at the Russian economy, not ours”.

Key announcements

09:30 – GBP – Monetary Policy Report Hearing 10:00 – EUR – Final CPI Y/Y – Set to remain unchanged at 5.1% 10:00 – EUR – Final core CPI Y/Y – Set to remain unchanged at 2.3%