IFX Market Report: Wednesday 16th February 2022

The Euro enjoyed a strong run of form on Tuesday as geopolitical tensions appeared to ease with reports “that some Russian forces had moved away from the Ukrainian border”. The Single Currency was able to maintain yesterday’s gains in the overnight session and starts this morning on the front foot. Since yesterday’s close the Euro has held steady against the Pound and edged closer to 1.14 against the US Dollar.

The safe-haven Dollar struggled on Tuesday as risk sentiment improved over the Russia-Ukraine standoff. The Euro was up 0.5% against the Dollar in the session and the US Dollar Index (DXY) was down by 0.3%. While geopolitical issues remain essential to the Dollar’s performance this week, investors will also be looking for any comments from Federal Reserve officials on the interest rate hike outlook for further direction. Speaking on Monday St Louis Fed President James Bullard reiterated calls for a faster pace of interest rate hikes, claiming that “four strong inflation reports in a row warranted more aggressive action”. He went on to add that the Fed needed to “ratify” market expectations about its upcoming moves, noting that the Fed’s “credibility is on the line” as it attempts to bring down inflation from the current 40-year high.

GBPUSD recorded a minor loss on Tuesday as expectations of a Fed rate hike this month helped the Dollar pair off its daily losses against the Pound. Cable opened the day at 1.3565 and closed 30 pips below at 1.3535.

GBPEUR also made a loss yesterday as a stronger Euro capitalized against Sterling. The pair opened at 1.1954 and closed at 1.1915.

EURUSD ticked slightly higher on Tuesday – opening at 1.1348 and closing at 1.1360.

At 07:00 this morning January’s UK inflation reading came out 0.1% over forecast, printing a figure of 5.5%. UK Core Inflation came in at 4.4%, while the MoM number came in at -0.1%. Across the pond at 13:30, US Retail Sales is expected at 2%, 0.1% higher than the previous month. Finally, at 19:00 the FOMC will release its latest Minutes.

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