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Bank of Ireland Dealer Comment

8:58 28 Sep 2022
Morning Comment 28.09.2022

EUR

Europe’s woes continue following yesterday’s incidents with the Nord Stream gas pipelines. The EU have said that the incidents are ‘not a coincidence’ and that all information available points to deliberate sabotage. Both pipelines weren’t carrying any gas to Europe since Russia cut off supplies in July in retaliation to Europe’s support of Ukraine but the move sparks another geopolitical event which has sparked further risk aversion this morning. The deteriorating situation in Europe has seen EUR/USD reach a fresh 20 year low of 0.9543 overnight and markets will await further news and reaction from both the West and Russia. EUR/GBP has found some stability around the 0.8950 mark following its spike higher on Monday.

No data of note today.

GBP

The Pound has found some stability following the sharp sell-off in UK assets on Monday with EUR/GBP finding support around the 0.8950 mark and GBP/USD trades in a range between 1.0630-1.0830. We heard from Bank of England Chief Economist Hew Pill yesterday who’s comments were consistent with Monday’s statement that the BoE would respond to the strong sell-off in UK assets at their regular monetary policy meeting in November. Markets had been anticipating a potential emergency rate hike from the BoE but instead are now pricing in a significant hike of 150bps in November. Later today we hear from two more BoE speakers which will be watched closely for additional comments. Events in Europe could keep EUR/GBP contained within range while GBP/USD will likely be at the mercy of a strong Dollar.

No data of note today.

USD

EUR/USD is under pressure again this morning trading to a fresh low since June 2002 of 0.9543 overnight as renewed risk aversion intensifies following the Nord Stream incidents and Russia’s referendum victories in Ukrainian territories yesterday.  Additionally, economic data out of the US yesterday continues to support the Dollar. US Durable Goods Orders declined by -0.2% in August, better than forecasts of -0.4%. Consumer Confidence also improved for the second consecutive month, jumping to a five month high of 108 versus 104.5 expected. Falling gas prices, a strong labour market and rising wages all contributed to the jump in confidence and the unemployment rate now stands close to a 54-year low. Later today we hear from a number of Federal Reserve members including Chair Jerome Powell.

No data of note today.

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Author:Rachel Watters