IFX Market Report: Friday 7th January 2022

Sterling continued to hold its own on Thursday, marking gains against both the Euro and Dollar. Sterling’s impressive form is largely due to the markets expectations that the Bank of England will raise interest rates very soon. The UK central bank last month raised interest rates in an attempt to tackle rapidly rising inflation after the UK Consumer Price Index (CPI) rose by an annual 5.1% in November.

Across the pond, reports suggest that the US Dollar is “set to notch broad weekly gains and could extend its rally” today if this afternoons Labour data can reinforce “the case for early Federal Reserve interest rate hikes”. At 13:30 Decembers Non-Farm Payrolls will be released, forecasted at 400K with a previous of 210K. At the same time the US will also release its latest Unemployment Rate. Unemployment is set to come out at 4.1% with a previous of 4.2%. Speeches from St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly last night boosted investor speculation that US interest rate hikes are on the horizon. Bullard claimed that the Federal Reserve could raise interest rates as soon as March and is now in a "good position" to take even more (much needed) aggressive steps against inflation. In a separate speech Daly reiterated that “she too expects interest rate increases this year”.

GBPUSD started the Thursday session at 1.3500 and went on to close at 1.3537. This morning however, Cable has continued to advance and currently hovers around the 1.3550 mark.

After reaching 22-month highs earlier in the week, GBPEUR still remains in a strong trading position. The pair opened at 1.1954 and closed the day at 1.1973.

EURUSD was able to reclaim the 1.13 handle on Thursday after starting the day below that mark. The pair opened at 1.1293 and closed at 1.1306.

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