IFX Market Report: Tuesday 2nd November 2021

Markets remained largely quiet yesterday, with investors bracing themselves ahead of the central bank meetings this week. The FOMC are schedule to meet at 18:00 tomorrow, and the Bank of England at 12:00 on Thursday. Many experts are expecting the Fed to “taper” the pace of its US Treasuries and agency mortgage-backed securities purchases, which the Fed is currently absorbing at a pace of about $120B a month. It’s clear that “hotter-than-expected prints on inflation have tilted policymakers toward taking the Fed’s foot off of the acceleration pedal”. It should be noted that the Fed have been extremely cautious not “to rock the boat as it prepares to pull back on its tools”. Despite slowing bond and securities purchases not being a “direct link to the more powerful tool of raising interest rates”, investors are “already reading the tea leaves on tapering to price expectations for eventual rate hikes”.

Sterling struggled further against the Euro on Monday as France and Britain continue to negotiate about post-Brexit fishing rights. Speaking yesterday in Glasgow, French President Emmanuel Macron said that “discussions” on the matter “have resumed on the basis of a proposal I made to Prime Minister Johnson”. Despite nothing being agreed, Macron said his “understanding is that the British were going to come back to us tomorrow with other proposals”. It is likely that if the British and French can not come to a mutual agreement on fishing, it will probably pull Sterling lower.

GBPUSD was able to make subtle gains on Monday to start the month, Cable opened the session at 1.3655 and finished at 1.3661.

GBPEUR in contrast made a loss yesterday. The pair opened at 1.1801 and closed at 1.1784.

EURUSD was able to make upside moves in the session but couldn’t reach the 1.16 handle on the day. The pair opened at 1.1571 and closed at 1.1592.

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