BoE Rate Hikes Unlikely?
Bank of England Deputy Governor Cunliffe stated that the Ukraine crisis will intensify and prolong the surge in inflation and tighten the squeeze on household incomes. Cunliffe appears unlikely to back aggressive rate hikes, especially as he voted against the last rate hike in March.
The Euro edged lower, back below the 1.1000 level against the US dollar as the latest Ukraine developments sapped support. Evidence of Russian war crimes increased expectations that peace negotiations would be even more difficult in the short term. There was also increased pressure for further sanctions against Russia and increased concerns over the risk of disruption to energy supplies to the EU.
Sterling is rising above 1.3100 against the dollar this morning, attracting some buying despite the sustained US dollar demand. The Euro opens near 1.1960 against the Pound. A cautious market mood amid the heightening tensions between the West and Russia over Ukraine could cap Sterling moves on risk-sensitivities ahead of the UK and US data releases.