IFX Market Report: Tuesday 20th July 2021

On Monday risk aversion weighed heavy of the British Pound, as global markets experienced their “worst day of the year so far”. This morning Cable trades at its lowest point since January and GBPEUR has fallen below the 1.16 handle. Economists have claimed yesterday’s deteriorating market sentiment was caused by “a realisation amongst investors that the pandemic is shifting into a new phase that will inevitably see another wave of infections sweep the globe, driven by the COVID-19 Delta variant”. With over 36M Brit’s vaccinated, many investors are extremely worried how such a heavily inoculated country such as the UK can fall victim to a wave of the virus. It would appear that the “Delta variant’s transmissibility advantage over other versions of the virus means that vaccinations alone won’t result in a final herd immunity reckoning for the pandemic”. The overriding fear for markets is that new and more resilient mutations of the virus may become a perpetual phenomenon that continues to plague major economies, capping any form of long-term recovery.

Cables run of bad form continued yesterday as Monday proved to be another tough session. GBPUSD started the week at 1.3752 but came under significant selling pressures as market sentiment soured. The pair finally finished the day at 1.3670.

GBPEUR also fell victim to an aggressive sell off yesterday. The pair opened the day above 1.1650 at 1.1653, but depreciated rapidly, finishing the session at 1.1579.

EURUSD was almost unchanged yet again. With volatility almost void, the pair opened at 1.1801 and closed at 1.1806.

On the data front, once again it is a light schedule. From the US at 13:30 Building Permits MoM and Housing Starts MoM will be released at 13:30. With data releases scarce till Thursday, investors will be focusing on COVID-19 developments – meaning any news on the matter, good or bad, will dictate market performance.

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