Volatility set to continue

GBP

Sterling continued to ignore Prime Minister Johnson's problems and climbed against the single currency yesterday. It has also moved higher against the dollar after another rollercoaster day on the world's stock markets. There was no one particular driver behind its rise and was probably more of a reaction to Monday's sharp fall. Sterling continues to be at the mercy of changes in sentiment caused by the events on the Ukraine Russian border.

Today there is no fresh data scheduled, but there are rumours that Sue Gray's report will be published which may unsettle investors; otherwise, they are likely to mark time ahead of the decisions of the US Federal Reserve this evening

EUR

The Current Assessment of the Business Climate in Germany is worsening, according to figures released by the IFO yesterday. This data encouraged some selling of the euro, but the report had little impact on investors compared to the worries over Ukraine and the possibilities of a European conflict. The euro touched its lowest level since the start of the year against the dollar before bouncing back to open fractionally higher this morning.

Today there is no fresh data, and traders are likely to take the same cautious approach to trading the euro as they will other currencies before any announcements from the US Federal Reserve this evening.

USD

The VIX index, often called the "fear index", has been trading at its highest levels since October 2020. This reflects the market's worries over the action taken by the Federal Reserve and the build-up of troops on Ukraine's border. Yesterday demand for the dollar again moved in tandem with the stock markets as they oscillated wildly.

Today looks set to be another volatile day before Jerome Powell, Chairman of the Federal Reserve, speaks at the end of the FOMC meeting at 19.00(GMT). With markets so volatile at the moment, the Fed is unlikely to announce any immediate policy changes but are expected to map out a path for balance sheet reduction and three rises in interest rates this year, starting with a .25% move up in March.