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Putin attacks Ukraine


With the crisis in Ukraine now approaching an all-out war, after President Putin announced a “special military operation” in Donbas, the mood of the markets has completely soured. With risk aversion now, the uppermost thought in investors’ minds safe-haven assets and currencies have appreciated quickly overnight; consequently, sterling has fallen quite sharply against the dollar this morning. The developing situation in Ukraine will now dominate the markets; however, we will continue to follow the economic fundamentals behind the markets whilst being mindful of the geopolitical situation unfolding.

Yesterday the contingent representing the Bank of England, including Governor Andrew Bailey in front of a Treasury Select Committee, struggled to convince parliamentarians, and consequently the markets, that they had a grip on inflation. Today the Bank of England is hosting its first-ever BEAR conference*. The hosts are joined by Mary Daly from the US Federal Reserve and the ECB’s Isabel Schnabel, all of whom will try to calm the volatility of the markets when they speak later today.


The euro has fallen quickly against both sterling and, in particular, the dollar this morning as investors switch to the greenback’s safe haven. With war now seemingly inevitable on its doorstep, the economic and inflationary consequences will now concern investors, and the single currency could be in for a torrid time.

In a day bereft of economic data, the headlines from Ukraine will dominate the markets; however, it will be interesting to listen to Isabel Schnabel this afternoon to see whether she can calm investors. Recently she performed a u-turn on her dovish views about inflation. It will be interesting to see if she continues along this new hawkish route and whether the market pays more attention to economics or geopolitics.


The so-called relief rally in risk assets faded yesterday evening rapidly as stock markets slumped as they read between the lines of the news coming from Ukraine. This morning there is an understandable flight to safe-haven currencies such as the Japanese yen, Swiss franc and the dollar. This afternoon there is, at last, some economic data to distract traders from the issues over Ukraine’s border.

The reports start with the weekly jobless total, preliminary Gross Domestic Product for the fourth quarter, and most importantly, Personal Consumption data before the latest Home Sales data is released. What promises to be a long day finishes off with a speech from Federal Reserve member Loretta Mester, who will undoubtedly try and soothe the markets.

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