IFX Market Report: Monday 7th March 2022

The Euro suffered heavy losses against both the Pound and Dollar on Friday. The majority of these losses can be attributed to the on-going war in Ukraine. The Single Currency also struggled due to rising inflation. In the accounts of their latest meeting, The European Central Bank noted it “believed that inflation was likely to continue higher-than-predicted for longer”. Policymakers also claimed “that the greatest risk was no longer tightening monetary policy too soon but too late”. Markets have now “forwarded chances of an ECB hike from 2023 to later this year”.

Across the pond, Federal Reserve Jerome Powell indicated last week that he plans to press ahead with a “series” of interest rate hikes from March. In his testimony before Congress, Powell claimed that current inflation “is just nothing like anything we’ve experienced in decades”. In an attempt to battle rising inflation, the Fed Chair “confirmed his support for a quarter-point rate rise at the central bank’s March meeting as he laid out the case for tightening monetary policy amid heightened geopolitical tensions”. While Powell was bullish, he noted the US central bank will need to “proceed carefully as we learn more about the implications of the Ukraine war for the economy”.

Dampened risk-appetite lead to losses for Cable on Friday. GBPUSD opened the day at 1.3323 and closed the week at 1.3214.

GBPEUR was able to surpass the 1.21 handle on Friday – opening at 1.2098 and closing at 1.2103.

EURUSD in contrast finished the week at a loss. The pair started at 1.1012 and closed at 1.0917.

On the data front, it’s a quiet schedule today. At 07:00 Germany released January’s Retail Sales. Forecasted at 9.8%, with a previous of 0%, the final figure came in at 10.3%. From the US, Consumer Credit Change is scheduled at 20:00, forecasted at $23.8B.

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