IFX Market Report: Wednesday 13th April 2022

The US Dollar made a strong rebound on Tuesday after the US printed slightly softer-than-expected inflation data. Stripping out price gains for volatile items such as food and energy left the “Core” US Inflation Rate YoY up 0.3% month on month, lower than the 0.5% forecast from economists at Reuters. Despite this disappointing reading, headline consumer prices rose 8.5% year on year in March, up from 7.9 per cent in February - “marking the quickest annual rise since 1981” according to the Bureau of Labor Statistics. The Financial Times claimed yesterday that “the lower core inflation reading initially brought a measure of relief for investors, who feared an inflation overshoot would heap pressure on the US Federal Reserve to tame price growth by swiftly raising interest rates — the prospect of which has unsettled global markets in recent months''. The Fed last month lifted its benchmark interest rate a quarter of a percentage point, bringing the target range to 0.25% to 0.50%, in its first increase since 2018.

The Dollar received a further boost when FOMC policymaker and Fed Vice Chair Lael Brainard “that there were some signs of “welcome” cooling in the latest inflation readout, but emphasized that the central bank is still proceeding with a series of interest rate hikes, as well as an effort to trim its balance sheet”. Brainard noted that she’ll be focusing on “whether we continue to see moderation in the months ahead”.

GBPUSD started yesterday at 1.3008 and made minor gains despite a stronger Greenback. Cable finished the session at 1.3036.

Sterling also made solid gains against the Euro on Tuesday, closing above 1.20 after starting the session in the 1.19’s. GBPEUR opened at 1.1978 and closed at 1.2002.

EURUSD traded flat on Tuesday. The pair opened at 1.0860 and closed at 1.0861.

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