IFX Market Report: Thursday 22nd April 2021

Markets were flat on Wednesday with nearly all G10’s tightly rangebound. Impressively, EURUSD has been able to sustain itself above the 1.20 handle once more. Economist’s have noted that the pair “offers a neutral stance in the near-term, with limited bearish scope”. EURUSD “stands a few pips below a bullish 20 SMA while holding well above the longer ones, with the 100 SMA about to cross above the 200 SMA. Technical indicators lack directional strength but develop within positive levels, indicating absent selling interest.”

GBPEUR disappointingly was unable to hold on to the 1.16 handle in the overnight Asian session, opening Wednesday just below that mark. Despite hitting fresh highs yesterday GBPEUR now looks to be once again stuck trading below 1.16.

GBPUSD started Wednesday modestly at 1.3930 and closed only 1 pip below. Similarly to GBPEUR, Cable looks unable to reclaim its recently achieved highs.

EURUSD opened the Wednesday session at 1.2029 and closed at 1.2027.

On the data front, at 10:00 the ECB will be delivering their Government Budget to GDP. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when a government spends more money than it takes in. The opposite of a budget deficit is a budget surplus. 2019’s reading was -0.6%. Then at 12:45 the ECB will give their latest interest rate decision. Given that global bond yields have finally settled down, it’s likely the case that the ECB feels little pressure to make any significant changes to their policies. One analyst notes that “stability in global bond yields influenced a softening in ECB interest rate cut expectations. In mid-January, there was a 54% chance of a 10-bps rate cut by December 2021; that probability now stands at a comparatively meagre 15%. This is stark change in from where we were at the end of 2020, when rates markets were pricing in a 10-bps rate cut in July 2021”.

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