IFX Market Report: Wednesday 27th October 2021

GBPEUR surged to fresh yearly highs on Tuesday, marking a third straight day of upside for the pair. The Euro has struggled since the start of the week with Germany’s IFO Business Climate denting the chances of possible gains for the currency, coming in below forecast at 97.7. Adding to the Eurozone’s misfortune, inflation “expectations among bond investors hit a new seven-year high above 2.07% on Tuesday, shooting past the European Central Bank’s target on the back of soaring oil prices and supply chain crunches around the world”. This naturally puts an incredible amount of pressure on the ECB ahead of its policy meeting this Thursday “as it considers how much monetary support to provide the bloc’s economy once its pandemic bond-buying expires next month”. Given that the recent rise in inflation is largely due to an increase in energy prices, investors will be curious to see if Christine Lagarde sticks to her rhetoric that this rise is “transitory”.

Despite experiencing some volatility in the session, Cable closed only 1 pip below where it opened on Tuesday. GBPUSD opened at 1.3769 and saw some positive price-action at around midday, allowing the pair to move beyond the 1.3800 handle. Unfortunately, Cable was unable to sustain this position, and closed the day off at 1.3768.

GBPEUR was the biggest mover of the day, surpassing levels not seen since February 2020. The pair started the day at 1.1871 and closed at 1.1880. It’s likely that if the ECB reiterate their dovish stance in tomorrow’s meeting, the Euro may drop even further.

It was yet another disastrous session for EURUSD yesterday. The pair started the day at 1.1598 and closed at 1.1588.

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