IFX Market Report: Thursday 23rd September 2021

The US Dollar gained momentum towards the end of yesterdays session as Federal Reserve Chair Jerome Powell said the US central bank could “easily move ahead” with tapering “at its next meeting in November if the economy progresses” as expected. The Financial Times reported that a “growing number of Federal Reserve officials expect an interest rate increase next year as the US central bank charges ahead with a reduction of its massive stimulus programme that will probably be announced in November”. This hawkish outlook from the Fed forced GBPUSD to mark its fourth day of losses in the last five, and the pair struggled overnight in the Asian session, dipping just below the 1.3610 handle.

Cable opened on Wednesday at 1.3650 and came under significant selling pressures as the day continued. GBPUSD finally closed the session at a modest 1.3643 but was exposed to the downside risks overnight. This morning the pair has somewhat recovered and will be looking to the Bank of England’s latest Interest Rate decision this afternoon for further direction. As the BoE “approaches the end-point of the £875B asset purchase program”, the UK central bank is widely expected to keep interest rates on hold. Due to the fact the BoE are ahead of other major central banks in planning to cease their QE program by the end of the year, “investors will be more interested in the tone of the statement amid expectations for a tighter monetary policy next year”. Despite there being no expected policy changes from Bailey and the BoE, many argue the meeting could trigger volatility in the Pound.

GBPEUR will hope today’s BoE meeting will enable the pair to claw back some of the losses it made on Wednesday. The pair started the session at 1.1646 and went on to close at 1.1627.

EURUSD in contrast was able to gain some upside on Wednesday. The pair opened the day at 1.1720 and closed almost 15 pips above at 1.1734.

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