IFX Market Report: Friday 18th March 2022

The British Pound fell on Thursday as the Bank of England voted 8-1 in favour of raising interest rates by 0.25%, taking the base rate to 0.75%. With inflation already at a three-decade high at 5.5%, the Monetary Policy Committee acknowledged at yesterday’s meeting “that the shock caused by Russia's invasion of Ukraine will hit economic growth as well as driving up inflation”. Moving forward there BoE “faces a careful balancing act between raising rates to cool price rises without moving so sharply that it risks helping tip the UK into a renewed downturn”. On the topic of future rate rises, the committee said hikes “might be appropriate in coming months, but there were risks on both sides of that judgement depending on how medium-term prospects evolved”.

Similarly to Sterling, the Dollar also suffered a tough session on Thursday “as investors digested the Federal Reserve's monetary policy outlook a day after the U.S. central bank's expected rate hike, while the Euro rose as investors kept an eye on Russia-Ukraine talks”. The Dollar Index (DXY) was down 0.5% at 97.980 and hit its lowest in a week.

Cable’s losses yesterday were capped by a struggling Dollar. GBPUSD opened at 1.3179 and closed not far off at 1.3157.

GBPEUR was exposed to heavy downside pressures on Thursday. The pair opened at 1.1933 and closed 1.1839.

EURUSD was able to reclaim the 1.11 range yesterday. The pair started the session at 1.1044 and finished at 1.1113.

At 10:00 today the Eurozone with publish January’s final Balance of Trade. At 14:00 US CB Leading Index and Existing Home Sales are both scheduled. Then from 16:30, Fed members Barkins, Evans, and Bowman will all be speaking.

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