IFX Market Report: Tuesday 5th April 2022

The US Dollar was stronger on Monday as US two-year Treasury yields climbed to their highest level since early 2019, “continuing to push higher on expectations that the Federal Reserve will deliver bigger rate hikes in the months ahead to tame inflation”. Mary Daly, President of the US Central Bank’s San Francisco branch, said yesterday that “the case for 50, barring any negative surprise between now and the next meeting, has grown… I’m more confident that taking these early adjustments would be appropriate”. Daly joins an expanding group of Fed policy makers who have rejected a gradual approach to scaling back support for the economy in the aftermath of the pandemic-induced recession, “embracing a more rapid withdrawal as the labour market has bounded back and price pressures have become far-reaching”.

Support has grown in recent weeks among Fed officials for interest rates to rise to a “neutral” level “that neither aids nor constrains growth, and to get there more quickly than initially expected by moving in larger increments than the quarter-point rate increase delivered in March”.

Despite the Greenbacks advances on Monday, downside for Cable was limited on Monday due to improving market sentiment. GBPUSD opened the day at 1.3132 and closed the session at 1.3120.
Sterling was able to make minor gains on the Euro yesterday. The pair opened at 1.1903 and closed at 1.1932.

EURUSD slipped below the 1.10 handle on Monday - opening at 1.1032 and closing at 1.0995.

On the data front, at 09:30 this morning, UK final S&P Global/CIPS Services PMI for March will be released. This afternoon, the US will publish its latest ISM Non-Manufacturing PMI. From 15:00, Fed members Brainard, Kashkari and Williams will all be speaking

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