IFX Market Report: Friday 19th November 2021

Sterling had a tough session on Thursday, marking losses against both the Euro and US Dollar. The Pounds recent boost this week has come from the markets expectations that the Bank of England will raise interest rates at December’s meeting. Many economists argue the UK central bank will “hike 15bp this December and a further 50bp in 2022”. However, yesterday’s performance would suggest the advance in GBP is “running out of steam now” given that a BoE rate hike is now fully priced in.

After reaching monthly highs on Wednesday, GBPEUR fell below the 1.19 handle on Thursday. The pair opened the session at 1.1910 and closed at 1.1874.

A weaker Dollar limited Cable’s losses on Thursday. GBPUSD started the day at 1.3498 and closed at 1.3488.

EURUSD was able to claw back some of its recent losses on Thursday as the pair entered “into a consolidation phase in the early European session”. Capping any Dollar gains was the drop in the benchmark 10-year US Treasury bond yield, which “fell nearly 3%... and caused the Greenback to lose interest”. At present, the yield is holding below 1.6% and “unless it manages to reclaim that level, the Dollar could find it difficult to regather its strength”. EURUSD opened yesterday at 1.1333 and closed at 1.1358.

On the data front, this morning the UK printed its November GFK Consumer Confidence number, coming in at -14. Retail Sales YoY for October also came out at 07:00, printing a final figure of -1.3%. Retail Sales excluding fuel came in at -1.9%. At 08:30 this morning European Central Bank President Lagarde gave a speech, but this did little to impact markets. In the afternoon Fed members Christopher J. Waller and Richard Clarida will be giving a speech, followed by the second of the day for Lagarde at 18:00.

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