IFX Market Report: Tuesday 15th March 2022

Sterling was able to gain ground against both the Euro and Dollar yesterday as market sentiment improved. A fourth round of peace talks between Ukraine and Russia commenced yesterday after “substantial progress” had been made by both sides over the weekend. Despite both sides have been working to resolve the conflict, Ukrainian cities remain under attack.

While the majority of investors focus will be on Ukraine, the Federal Open Market Committee’s March meeting begins tomorrow. The Federal Reserve “are all but guaranteed to raise the federal funds rate by a quarter of a percentage point — their most forceful step to date to shift monetary policy away from the ultra-loose settings put in place at the onset of the pandemic”. This would be the first Fed rate hike since 2018 and comes “despite a sharp escalation in geopolitical tensions following Russia’s invasion of Ukraine, which has attracted some of the most punitive financial sanctions ever from the US and its allies”. There is a consensus amongst economist “that concerns about inflationary pressures will far outweigh any fears of a growth slowdown — especially given the strength of the labour market — and compel the Fed to proceed with a series of interest rate increases this year”.

GBPUSD was able to make subtle gains on Monday as risk-appetite improved. Cable opened at 1.3039 and closed at 1.3061.

GBPEUR in contrast made a loss yesterday as investors favoured Sterling over the Euro. The pair started at 1.1927 and closed at 1.1884.

EURUSD gained solid upside on Monday as it edged closer to 1.10. The pair opened at 1.0931 and closed at 1.0991.

UK labour data was released this morning and showed an improvement in employment. January’s Unemployment Rate beat forecasts by coming in at 3.9%. At 10:00 the Eurozone will publish March’s ZEW Economic Sentiment Index. Then at 12:30, the US will release it’s latest PPI MoM.

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