Quiet start, Russian sanctions in focus…

22 April, 2014

Tom Arnold

The markets are still looking upon Sterling as the place to go, with the UK economy doing well, and key economic numbers moving to such a positive position that the Bank of England can start to curtail stimulus packages and move back to a tighter monetary policy with critically possible interest rate rises. While it is unlikely that we will see any rises in the short term, it is certainly more on the radar than previously and as such the Pound is able to take significant strength, as a higher yielding currency (i.e. with higher interest rates) attracts more investment and hence gains more strength.

There is however the ominous cloud of the Ukraine crisis hanging over the financial markets at present. With the West posing little in the way of actual threat, there has not been too much reaction so far, as serious conflict is really the big fear. This could of course change especially with the US seemingly moving to a more aggressive stance, however a more interesting point from the financial situation is the threat of sanctions. The US is keen to put sanctions in place, and the retaliatory threat from Putin of similar, doesn’t really bother them because US/Russia trade is not very large. However Europe is not so keen. Europe and more specifically Germany does a huge amount of business with Russia, and sanctions would hit home very hard on what is a very fragile European recovery. So watch this space over the coming days and weeks.

We have little in the way of data today, with some construction data and consumer confidence numbers from Europe as the only real things to watch for. Tomorrow hots up significantly with the release of the Bank of England minutes from this month’s policy meeting – which way will the vote have gone, and will there be any sign of interest rate rises? Thursday sees a speech from ECB president Draghi, some US manufacturing order numbers and employment data, and Friday is another quiet one apart from UK retail sales and mortgage approvals.

As ever stay in close contact with your CI account manager to be kept fully abreast of what is occurring and what effects the data releases and announcements are having.