IFX Market Report: Wednesday 19th January 2022

Rising US bond yields were able to strengthen the Dollar on Wednesday ahead of next weeks all-important Federal Reserve policy meeting. The US Dollar Index (DXY) rose by 0.5% on Tuesday and has sustained the 95.768 level going into today’s session. This boost pushed the Buck “back above support levels that have held for the past few months in anticipation of rising US interest rates”.

Disappointing UK inflation data released early this morning has led to more speculation that the Bank of England will have to raise rates again at their February meeting. Inflation YoY for December printed a final figure of 5.4% this morning, 0.2% over forecast. This is highest inflation has been since March 1992 and is up considerably from November’s reading.

GBPUSD made a loss on Tuesday, slipping below the 1.36 handle by the close. Cable started the session at a respectable 1.3643 and deteriorated as day went on – finally finishing at 1.3581.

GBPEUR in contrast made small gains yesterday. The pair opened at 1.1974 and closed 10 pips above at 1.1984.

A stronger Dollar and weak Euro forced EURUSD to the downside on Tuesday. The pair opened at 1.1394 and closed at 1.1333. The Euro marked its sharpest daily drop in a month yesterday as it shed almost 0.7% in the session.

On the data front, Germany also released its latest inflation numbers this morning. Coming in as forecast, German Inflation YoY for December published an actual figure of 5.3%. The MoM figure also came in as expected at 0.5%. In the afternoon, at 12:00 US MBA Mortgage Applications will be released, followed by US Building Permits MoM and Housing Starts MoM. At 14:15 Bank of England Governor Andrew Bailey will be speaking.

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