IFX Market Report: Monday 7th February 2022

After a volatile session on Thursday, FX markets traded rather flat on Friday. After seeing heightened price action from Sterling and the Euro on Thursday, the two currencies ended the week settled. The Euro held firm on Friday as global “investment banks brought forward their calls on European Central Bank interest rate hikes after a hawkish turn from the ECB that opened the door to the possibility of increased borrowing costs this year”. With Eurozone inflation at a record high last month, ECB President Christine Lagarde “declined to repeat her past comment that a 2022 rate hike was very unlikely at a news conference following the bank's policy meeting on Thursday”. According to Reuters, a decision has been made “to dial back stimulus… starting with a faster-than-expected wind-down of the bank's bond purchases, which according to ECB guidance need to end before rate hikes”. Many economists said on Friday that “they expected the ECB to raise interest rates by 25 bps each in September and December, putting the bank's policy rate at 0% by the end of the year”.

GBPUSD made a loss on Friday as Sterling lost a bit of momentum. Cable opened the day at 1.3570 and closed at 1.3537.

GBPEUR also made a subtle loss on Friday. The pair opened at 1.1844 and closed at 1.1834.

EURUSD traded in a tight range at the end of last week. Opening at 1.1457 the pair went on to close at 1.1447.

On the data front today it’s a quiet schedule. At 15:45 ECB President Lagarde will be speaking. Any further comments on inflation or monetary policy could give the Euro a boost. At 20:00, the US will release its Consumer Credit Change for the month of December.

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