EUR/GBP pressured as Ukraine crisis escalates

• EUR/GBP is in the hands of the bears at the start of the week.
• Ukraine crisis is driving risk over a cliff as tensions escalate. 

EUR/GBP is lower at the start of the week, caught up in the risk-off flows during the open that saw the safe-haven currencies gain following the latest headlines surrounding Russia’s invasion of Ukraine.

Missiles pounded the Ukrainian cities once again over the weekend as Russian forces pressed their advance. Western powers’ moves to cut some Russian banks from the SWIFT global payments system and freeze the Bank of Russia’s reserves have resulted in Russian president Vladimir Putin giving the nuclear readiness order. He said “top officials in NATO’s leading countries have been making aggressive statements against our country,” according to a report from Russian state news operator TASS.

Meanwhile, Ukrainian President Volodymyr Zelensky confirmed to Sky News that the two sides would hold the talks on the border of Ukraine and Belarus, where some of the Russian troops invading his country had been held. 

Meanwhile, last week, Bank of England policymaker Catherine Mann highlighted high inflation expectations as a reason for voting for a 50 basis point interest rate rise earlier this month. The Bank of England Governor Andrew Bailey also told lawmakers he saw clear risks that inflation could overshoot their own forecasts but urged investors not to get too carried away about the likely scale of rate increases. Investors are fully pricing in another 25 basis point rate increase at the central bank’s next meeting on March 17 with another hike fully priced at the subsequent meeting in May.

There will be more central bank speak this week. The BoE’s Saunders, Mann, Tenryro, and Cunliffe are all due to speak, while European Central Bank Minutes from the February meeting could shed light on the clear disconnect between the policy statement and the presser.