IFX Market Report: Friday 11th March 2022

Risk-off sentiment gripped world markets yesterday as peace talks between Russia and Ukraine broke down with no progress made. The Euro was down against its peers on the day despite a relatively hawkish message from the European Central Bank. ECB President Christine Lagarde said that “any adjustment to the key ECB interest rates will take place some time after the end of our net purchases under the APP (Asset Purchase Programme) and will be gradual”. She went on to add that “the path for the key ECB interest rates continues to be determined by the Governing Council's forward guidance and by its strategic commitment to stabilise inflation at 2% over the medium term”. Before the meeting, money markets had been “pricing in a 30-basis point increase to the ECB's deposit rate by December, taking it to minus 0.2% from the current minus 0.5%”. Investors have scaled back their bets on rate hikes since Russia invaded Ukraine in late February. The conflict is expected to have a negative effect on European growth and make the ECB more cautious about tightening its policy. According to Reuters, markets are now pricing in around 43 basis points’ worth of interest rate increases this year.

GBPEUR made subtle losses on Wednesday – opening at 1.1927 and closing at 1.1919.

EURUSD in contrast lost over 50 pips in yesterday’s session. The pair opened at 1.1062 and closed at 1.1006.

GBPUSD recorded a loss on Wednesday. Cable started at 1.3192 and closed at 1.3116.

At 07:00 the UK released its GDP YoY figure and GDP 3-Month average. YoY reading came in at 10% and the 3-Month average was published at 1.1%. Also released was Balance of Trade, Construction Output, Good Trade Balance, Industrial Production, and Manufacturing Production. Lastly, at 15:00 the US releases its preliminary Michigan Consumer Sentiment.

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