IFX Market Report: Wednesday 23rd September 2020

The US dollar was amongst the best performing currencies yesterday after the release of positive US economic data and hawkish comments from a Federal Reserve official which hinted at the possibility of US interest rates hikes.

US home sales surged to their highest level in nearly 14 years and following months of dismissing any rate hikes in the immediate future, Chicago Fed President Charles Evans said the Fed could start to raise rates before inflation averaged at 2%. Evans is known as one of the more dovish officials, so his comments caught the market off guard.

The dollar index continued to rise reaching 94.05 yesterday and 94.19 this morning. The dollar has also been helped by the rise in COVID-19 cases in Europe with investors buying safe haven assets, concerned about the prospects for the global economy.

In the UK, Prime Minster Boris Johnson announced a series of measures aimed at reducing the recent surge in the infection rate in the UK. The changes which included ordering bars and restaurants to close at 10pm and asking employees to work from home again were seen by markets as a negative for sterling but the EU-UK negotiations remain the key driver.

GBPUSD endured a turbulent day, after falling to 1.2734 in the morning, the pair bounced up by over a cent to 1.2859, however the recovery was short lived and the pound fell to a near 2-month low of 1.2709 as the session finished.

GBPEUR initially climbed in the morning, reaching a high of 1.0932 but fell in the afternoon to a 1-week low of 1.0843.

EU Chief Negotiator Michel Barnier is in London today to continue the talks, the pound would certainly benefit from any breakthroughs, but experts are not optimistic.

The euro fell to a 8-week low of 1.1708 against the US dollar.

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