IFX Market Report: Thursday 28th October 2021

The Dollar struggled on Wednesday as the “American currency fell away from investors’ radars”, due largely to US government bond yields falling to “worrisome levels”. The Yield on the 10-year Treasury note dropped to its lowest in two weeks yesterday, hovering around 1.58%. This in turn enabled the Euro to recover some recent losses against the Greenback – pushing as high as 1.1625 in the session. Looking ahead to this afternoon, the ECB press conference is scheduled to start at 13:30. Investors will be looking for “any indication of a shift in the ECB’s thinking on the nature of the current spike in inflation”. Since September Christine Lagarde has been persistent that “the current increase in inflation is expected to be largely temporary” and analysts agree that any change to this assessment “could be a real market mover as it would also imply a more hawkish tone inside the bank’s Governing Council”. With that said, “the majority of economists expect the ECB to err on the dovish side in an effort to prevent an unwarranted tightening of financial conditions when the euro zone economic recovery is slowing”.

Despite the UK government delivering its new Budget yesterday, Sterling remained largely unchanged. GBPUSD opened the session on Wednesday at 1.3748 and closed at 1.3739.

Against the Euro Sterling also made a subtle loss. GBPEUR opened at 1.1847 and finished the day at 1.1843.

EURUSD opened yesterday at 1.1604 and closed at 1.1600, unable to sustain the position it achieved in the afternoon to the close.

Aside from the ECB meeting, there is also a number of important releases from Germany and the United States today. At 08:55 this morning German Unemployment Change came in at -39K, while the Unemployment Rate printed a figure of 5.4%. This improvement shows that “companies in Europe’s largest economy were firmly on a post-pandemic hiring spree despite supply bottlenecks that have hurt manufacturers”. In light of the positive results, Chief of the Federal Labour Agency Detlef Scheele warned that “the numbers remain significantly lower than before the pandemic” and Germany will still have to face “big challenges” as it strives for a full post-pandemic recovery. Across the pond, the US will release its Q3 GDP Growth Rate figures, forecasted at 2.7% with a previous of 6.7%. At the same time, the weekly US Jobs Report will be published, consisting of Continuing Jobless Claims, Initial Jobless Claims, and Jobless Claims 4-week Average.

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