IFX Market Report: Thursday 13th January 2022

Jerome Powell’s comments on Tuesday lead to a weaker Dollar yesterday, allowing both the Euro and Pound to capitalize against the Greenback in the Wednesday session. Investors were expecting a more hawkish message from the Chair of the Federal Reserve as he testified before the Senate Banking Committee. EURUSD was able to extend its rally in the early American session yesterday, climbing above the 1.1400 handle for the first time since mid-November. GBPUSD was also able to push higher in the American trading hours as the pair strived for 1.3700.

Adding to the Dollar’s woes on Wednesday was the release of Decembers Inflation Rate. While the actual figure was in line with economists’ expectations, the data showed that US “consumer prices rose solidly” in the month of December. Directly after the release, US Dollar Index (DXY) was down 0.5% on the day and slipped as low as 95.172 – its lowest point since 15th November. Some believe this rise in inflation will prompt the Fed to start raising interest rates as early as March this year. According to CME’s FedWatch tool, traders have priced in an about 80% chance of a rate hike in March”.

GBPUSD started the session below the 1.3650 mark at 1.3628. But as the Dollar weakened, Sterling advanced, and Cable finished at 1.3694.

GBPEUR had a rather uneventful session with the Greenback being in the spotlight. The pair opened at 1.1990 and closed not far off at 1.1985.

EURUSD in contrast soared on Wednesday, closing comfortably above the 1.14 handle. The pair opened at a humble 1.1366 and went on to finish at 1.1425.

On the data front, all notable releases come from across the pond today. At 13:00 Fed member Harker will be speaking. 30 minutes later US Continuing Jobless Claims and Initial Jobless Claims will be released. Then from 15:00 onwards Fed members Brainard and Evans will both be speaking.

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