IFX Market Report: Tuesday 4th January 2022

A stronger Dollar was able to mark gains against both Sterling and the Euro on Monday. The US Dollar reached its “strongest level in nearly five years” this morning, boosted “by a jump in Treasury yields” as markets bet on an early Federal Reserve interest rate hike despite a recent surge in global COVID-19 cases. Reports suggest that money markets have already “fully priced in a first US rate increase by May, and two more by the end of 2022”. The Dollar Index (DXY), which measures the currency against six other major peers, holds close to the one-week high of 96.328 reached yesterday.

GBPUSD started positively yesterday, opening the session at 1.3522. Cable came under significant pressure as the day progressed and slipped back below the 1.35 handle. GBPUSD closed Monday at 1.3458.

GBPEUR experienced a much tighter trading range yesterday, closing 1 pip above where it opened. The pair started at 1.1917 and closed at 1.1918.

EURUSD recorded severe loses on Monday as the US Dollar advanced against the Euro. The pair opened at 1.1346 and closed at 1.1292.

Yesterday, German Markit Manufacturing PMI disappointed by coming in 0.2 under forecast, printing a final figure of 57.4. The Eurozone Manufacturing PMI on the other hand, came in exactly as predicted, recording a final figure of 58. In the US, forecasted at 57.8, Manufacturing PMI came in just under at 57.7.

On the data front today, German Retail Sales smashed expectations by printing an actual figure of -0.2%, despite being forecasted at -4.9%. German Unemployment also improved; Unemployment Change came in at -23K and Unemployment Rate printed a final figure of 5.2%. Yet to come today, at 09:30 the UK will publish its latest Markit/CIPS Manufacturing PMI. UK PMI is forecasted to come in at 57.6 with a previous of 58.1. Then in the afternoon, the US will release December’s ISM Manufacturing PMI.

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