IFX Market Report: Tuesday 22nd March 2022

Sterling remained firm on Monday despite many downside pressures and a stronger Dollar. Rising US Treasury bond yields have boosted the Greenback as it “continues to outperform its rivals after starting the new week on a firm footing”. The yield on 10-year US Treasuries has climbed to 2.3% this month – its highest level since 2019. This comes after the Federal Reserve hiked interest rates for the first time since 2018 last week, raising the base rate to 0.25%. In a speech at the 38th Annual Economic Policy Conference National Association for Business Economics yesterday, Fed Chair Jerome Powell said he “will take the necessary steps to ensure a return to price stability”. He noted that if the Fed “conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well”. At present, the Fed expects to raise rates a further six times this year as it attempts to bring inflation under control.

GBPUSD edged closer to 1.32 on Monday – opening at 1.3158 and closing at 1.3195.

Sterling also made solid advances against a weaker Euro yesterday. GBPEUR opened at 1.1902 and closed at 1.1953.

EURUSD in contrast recorded a loss on Monday. The pair started at 1.1055 and finished at 1.1038. Today, EURUSD is struggling to stay above 1.1000 after dipping below that mark earlier. Given the Dollar’s impressive form, it’s likely Tuesday will be a tough session for the pair.

On the data front, it’s another quiet schedule. At 13:15 European Central Bank President Christine Lagarde will be speaking. Then from 14:30, Fed members John Williams, Mary Daly, and Loretta Mester will also be giving speeches.

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