IFX Market Report: Thursday 17th February 2022

Sterling was able to make subtle gains against the Dollar on Wednesday, edging slightly higher after the release of the Federal Reserve’s January Minutes. The Minutes showed that US policy makers are becoming increasingly concerned about rising inflation and financial stability. The FOMC also outlined their plans to start raising interest raises and reduce the asset holdings on their balance sheet. Despite the seemingly hawkish tone from the Minutes, the market interpreted them as dovish relative to expectations. St. Louis Fed President James Bullard had built up expectations earlier in the week when he called for a 50 basis-point hike, forcing the market to “price in the equivalent of seven 0.25 percentage point rate hikes this year”. Since the release of yesterdays Minutes however, market pricing eased to a “50-50 chance now of the Fed taking its benchmark rate up by 1.75 percentage points”.

GBPUSD started the session at 1.3566 and traded in a narrow range until the afternoon. Following the release of the Fed’s Minutes, Cable got a small boost and ended up closing the session at 1.3580.

GBPEUR also made minor advances on Wednesday, finishing the day just below 1.1950. The pair opened the day at 1.1913 and closed at 1.1941.

EURUSD in contrast recorded a loss yesterday. The pair opened the session at 1.1388 and closed at 1.1372.

On the data front, the markets focus will be on the US today. At 13:30 the US will release its latest Continuing Jobless Claims and Initial Jobless Claims. Continuing Jobless Claims is forecasted to drop by 16K and come in at 1605K. Initial Jobless Claims is also expected to fall 4K and is forecasted at 219K. At the same time the Philadelphia Fed Manufacturing Index is scheduled, forecasted at 20 with a previous of 23.2. At 16:00 St Louis Fed President James Bullard will be speaking, followed Cleveland Fed President Loretta Mester at 22:00.

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