Sterling is beginning to underperform


Sterling is the second worst performing major currency this past week and month as it proves to be a major loser in the financial fallout caused by Russia’s invasion of Ukraine, and there appears to be little upside in the near term. The outbreak of war and sanctions placed on Russia have led investors to rapidly reduce the number of interest rate hikes they expect the Bank of England to deliver over the duration of 2022-2023.

With little sign of an end to the war in Ukraine, the pound remains under pressure. The mid-month BoE interest rate decision and associated guidance will prove to be the highlight for Sterling, and will determine which direction it is heading next.

Furthermore, Governor Andrew Bailey speaking last week stated that price-setting practices from businesses and wage dynamics “very clearly” pose upside risks to inflation. Meaning rates must continue to rise, but that “markets must not get carried away”.


Investors are evidently concerned about a hit to Europe’s economy. The common currency briefly fell below support to touch a twenty-one month low against the dollar.

International companies have been forced to halt sales, cut ties, and dump tens of billions of dollars worth of investments. The euro remains under pressure and could decline further as there seems to be no sign of de-escalation.

Key announcements

10:00 – EUR – CPI Flash Estimate y/y – Forecast at 5.6% from previous 5.1%
10:00 – EUR – Core CPI Flash Estimate y/y – Forecast at 2.6% from previous 2.3%
15:00 – USD – Fed Chair Powell testifies