Forex snapshot

Ukrainian energy supply issues hang over the euro as Russia turns off the taps, while last week’s Mansion House revelations continue to prop up the GBP/USD.

Euro and US dollar notes
Source: Bloomberg

Euro affected by Russian fears

EUR/USD continues to bobble along, bouncing off the intraday low created when Mario Draghi first announced the current plans for tackling euro strength and kick starting the eurozone economy. This morning will also see the release of the latest German ZEW economic sentiment figures that could add some direction to the current rate.

As my colleague David Madden stated yesterday, tensions surrounding the standoff between Ukraine and Russia have risen after the deadline for Ukraine to pay off its outstanding debts to Russia was reached. As things currently stand, the dispute over the increased rate with which the Russians are now charging their neighbour is the crux of the issue. As a consequence of the deadline being reached, Russia has now turned off the taps to Ukraine. The Ukrainian leader now has to deal with a reduced energy supply while trying to engineer a ceasefire in the north of the country.

GBP/USD awaits MPC voting data

GBP/USD has once again charged straight up to the $1.70 level and slammed on the brakes rather than clearing this hurdle. The last couple of weeks had seen plenty of support being offered by the 100-day moving average.

UK inflation is expected to remain below the targeted 2% that the Bank of England has set. However, with the stronger oil price this might edge higher in the next report.

Last Friday’s comments from the BoE governor Mark Carney should ensure support for GBP/USD, as the prospect of an earlier start date for the increase in the base rate has now been signaled. Tomorrow’s minutes from the last UK monetary policy meeting could give a clearer indication of how strongly the group’s view is on this issue, and therefore a better indication of when this process might start. 

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