IFX Market Report: Monday 8th March 2021

After Jerome Powell’s comments on Thursday gave the Dollar significant momentum, Cable and EURUSD have continued to struggle. Having cemented its position as last week’s best performing G10 currency, many economists believe its recent form could extend beyond the end of this week. For EURUSD last week the pair feel to three-month lows, and this week focus will shift to the ECB as they prepare for their latest decision on Thursday.

After falling from the 1.39 handle, GBPUSD started Friday trading at 1.3872. The fragile pair came under significant pressure in the session as the Dollar pressed on following Powell’s comments the night before. Cable finally closed the week at 1.3817 and has yet to improve on this position.

GBPEUR in contrast had a rather flat session on Friday, opening at 1.1607 and 1.1603. Despite being one of the worst performers last week many believe GBP could rise this week if risk assets are able to stabilize, in which case, we could see the pair surpass the 1.17 handle.

EURUSD had a disastrous day on Friday. As US bond yields rose to pre-pandemic highs and the Dollar with it, EURUSD opened Friday at 1.1950 and closed at 1.1908.

As things turn from bad to worse for the Eurozone, the ECB meeting this week will be closely analysed by many. It is highly unlikely the central bank will lower rates further as this would send them into negative territory. The expectation is that the ECB will increase its forecast for inflation in 2021 and bring down its forecast for GDP growth, and stress that inflation is still likely to fall short of the near -2% target over the medium term. The focus will also be on the Bank’s efforts to explain how and when they plan to increase their bond buying purchases as a response to rising bond yields.

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