IFX Market Report: Wednesday 26th January 2022

After a volatile start to the week, markets calmed on Tuesday. Sterling made subtle gains against both the Euro and the Dollar in yesterday’s session after recording tough losses on Monday. It was a disappointing day for Dollar bulls with January’s US Consumer Confidence dropping from a strong November reading. The survey showed “more consumers planning to purchase homes, automobiles and other big- ticket items even as they grew less optimistic about business and labor market conditions in the short term”.

The main event of today will be the Federal Reserve interest rate decision at 19:00 GMT. Dutch Bank ING expects the Feds “QE programme to be terminated” at this month’s meeting and this “may be interpreted by markets as an indication that the Fed’s balance sheet will do the heavy lifting in the policy normalisation process, which could pour some cold water on current expectations for four rate hikes by the end of the year”. Their report goes on to add that “this should cause the Dollar recovery to stall or marginally reverse, although an escalation in geopolitical tensions in Ukraine would have the exact opposite effect on the Greenback”.

GBPUSD started the Tuesday session at 1.3483 and closed at 1.3489.

GBPEUR also traded within a tight range yesterday. The pair opened the day at 1.1935 and finished at 1.1959.

EURUSD made a loss on Tuesday – opening at 1.1297 and closing 1.1280.

On the data front, all eyes will be on the US today. Starting from 12:00 the US will release its latest MBA Mortgage Applications, Good Trade Balance, Retail Inventories (excluding autos) MoM, New Home Sales MoM. At 19:30, the Fed Press Conference will begin and investors will be looking for further insight from Fed Chair Jerome Powell.

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