IFX Market Report: Thursday 20th January 2022

After the Office for National Statics announced UK inflation increased to 5.4% in December, the Pound rallied against its peers, marking gains against both the Euro and Dollar. In December, the Bank of England (BoE) became the first major global central bank to hike interest rates since the start of the pandemic. Surging consumer prices has put BoE policymakers under pressure to be even more aggressive at their upcoming meeting. Governor Andrew Bailey claimed that the latest data is of “great concern”, suggesting he could be open to hiking rates once again in February.

The Dollar in contrast suffered tough losses on Wednesday. The main cause for Dollar downside is that “market investors are less sure about the US Dollar’s outlook now than they have been for many months”. In recent months, the Dollar had been “supported by the idea that monetary policy in the United States was likely to normalize at a faster pace than in many advanced economies. Now investors are growing more confident about other parts of the world, and looking for economies where growth could surprise to the upside”.

GBPUSD was able to surpass the 1.36 handle once again yesterday after starting the day just under at 1.3594. Cable finished the day at 1.3630.

GBPEUR also had an impressive Wednesday session. The pair opened at 1.1993 and closed at 1.2006.

EURUSD was able to make minor advances due to a weaker USD. The pair started at 1.1334 and closed at 1.1353.

On the data front, at 10:00 the Eurozone releases its final December Core Inflation Rate and Inflation Rate. Across the pond, at 13:30 the US weekly Labour Report will be published, consisting of Continuing Jobless Claims, Initial Jobless Claims and Jobless Claims 4-Week Average. At the same time, January’s Philadelphia Fed Manufacturing Index is due to be released.

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