IFX Market Report: Monday 31st January 2022

Sterling marked impressive gains against both the Dollar and Euro on Friday as investors eagerly anticipate this weeks Bank of England (BoE) interest rate decision. The Monetary Policy Committee (MPC) are set to raise interest rates by 0.25% to 0.5% on Thursday, the UK central bank’s first back-to-back rate hike since 2004. Latest reports show that “financial markets are now pricing in four rises in 2022” and “one in three investors” think the UK central bank will raise rates to 1.5% by the end of the year – it’s highest level since 2009. This will likely improve Sterling’s performance and enable the currency to gain an edge on its peers. It’s possible if the BoE do raise rates on Thursday, Cable could surpass 1.36 and GBPEUR could reach as high as 1.22.

GBPUSD was able to reclaim 1.34 on Friday as Sterling enjoyed a swing of momentum in the session. Cable opened Friday at 1.3374 and closed the week at 1.3423.

GBPEUR improved on its already strong position Friday – opening at 1.2008 and closing 1.2021. Given the ECB’s continued dovish approach, its possible Sterling could make further record gains against the Euro.

EURUSD made subtle gains on Friday, trading the session in tight range. The pair started at 1.1138 and finished the day at 1.1165.

On the data front, Monday is quiet with only a few notable releases from Europe. At 10:00 the Eurozone will print its Flash GDP Growth Rate figures for Q4. QoQ is forecasted at 0.3% with a previous of 2.2%. YoY is forecasted at 4.7% with a previous of 3.9%. Lastly at 13:00, Germany will publish its preliminary Inflation Rate for January. The YoY figure is expected at 4.3%and MoM -0.3%.

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