IFX Market Report: Tuesday 29th March 2022

Sterling declined against the Euro and Dollar yesterday after Bank of England (BoE) Governor Andrew Bailey said that Britons will be facing a “very large shock to aggregate real income and spending” from rising prices of energy and imported goods. Mr Bailey warned of stagflation, “suggesting slowing economic growth and soaring inflation posed the biggest challenge to the central bank’s Monetary Policy Committee since its creation in 1997”. The BoE Governor also noted that Russia’s invasion of Ukraine had exacerbated the energy supply shock, adding: “The shock from energy prices this year will be larger than any single year in the 1970s. The caveat is that the 1970s had a succession of years and we very much hope that would not be the case now. But as a single year, this is a very, very big shock.” Bailey claimed the UK and the Eurozone were confronting a similar energy shock, because they both relied on the same gas market, adding it was different for the US because of its bigger domestic supply.

GBPUSD started the week at 1.3153 but quickly came under pressure as demand for the Greenback picked up. Cable went on to close below the 1.31 handle, finishing at 1.3090.

GBPEUR also recorded a loss on Monday. The pair opened at 1.2005 and closed at 1.1930.

EURUSD in contrast made subtle advances in the Monday session. The pair started at 1.0956 and closed at 1.0970.

In regard to the economic calendar, German Gfk Consumer Confidence was released this morning at 07:00. Forecasted at -14, with a previous of -8.1, the final reading for April came in at -15.5. At 09:30, the UK published its latest Mortgage Approvals and Mortgage Lending figures for February, both coming in under forecast. At 12:00 the BoE will release its Quarterly Bulletin. Then at 14:00 Fed member Williams will be giving a speech, followed by the release of March's US CB Consumer Confidence.

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