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14th February - Weekly FX Update

Top Currency Pairs Monday 14th February 9:00 UTC GBP/USD: 1.34998 (Last Week: 1.35375) EUR/USD: 1.13113 (Last Week: 1.14324) GBP/EUR: 1.19349 (Last Week: 1.18413)

Market News

Pound Sterling GDP figures were released last week, which showed the UK economy increased by 7.5% in 2021, after a 9.4% fall in 2020. This made the United Kingdom officially the fastest growing economy of the G7 nations over last year as a whole, despite contracting 0.2% in December as the Omicron variant dented consumer spending. Looking ahead, the UK will see employment figures released this week which will be at the forefront of data releases, with the current unemployment rate sitting at 4.1%. Inflation will also be released Thursday, but after the BoE upped their inflation forecast peak beyond 7%, figures released are unlikely to move markets. The most important catalyst will come from the Ukraine border, as Boris Johnson has moved into the weekend stating that intelligence coming out of Ukraine is "grim" and that it is "probably the most dangerous moment in the course of the next few days, in what is the biggest security crisis Europe has faced for decades". As expected, any escalation around Ukraine will be disastrous for economic recovery.

Euro Last week, German inflation came in at 4.9%, marginally lower than previous months. This was mildly positive news for the ECB, as other European countries inflationary data continues to spiral out of control. Most notably, Holland posted figures coming in at a 40-year high. This has benefitted the Euro in the currency markets as investors reprice the ECB interest rate expectations, with the next Eurozone inflation figures being a key catalyst next week. Looking ahead, the Ukraine situation is at a critical level, providing a massive risk to Europe. More than a dozen nations have now urged their citizens to flee Ukraine, as Russia continue to ignore formal requests to explain the build-up of troops. Escalation would completley disrupt Europe's economic recovery as intelligence suggests Russia could invade "at any moment" and potentially "with no notice".

U.S. Dollar On Thursday, consumer prices accelerated to their highest level in 40 years, with a higher than expected jump to 7.5% in year-on-year CPI, loading pressure on to the Federal Reserve to act aggressively. An initial 50-basis-point rate hike is expected by Wall Street economists. This week, the Fed publishes minutes from its last meeting on Wednesday, which will give signs on plans for rate hikes and views on inflation. Investors will also be keeping a very keen eye on tensions between Russia and Ukraine, after Biden's hour long phone call with Putin failed to make any breakthrough, as a senior US official said the call brought "no fundamental change" to a worsening crisis. Other American officials believe an invasion could come on Wednesday, with the US and its allies prepared to "respond decisively and impose swift and severe costs on Russia".

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