IFX Market Report: Wednesday 8th December 2021

Markets traded rather flat on Tuesday with little significant price-action in the session. Despite the fact that risk appetite strengthened on Tuesday due to further “optimism that the Omicron variant will lead to mild symptoms and limit damage to the economy even if infection rates increase strongly”, the Pound depreciated against the Dollar in the session. The US Dollar was able to maintain its form yesterday, with the DXY index trading just shy of the one-week high of 96.592 it reached earlier in the day. The Pound in contrast was hindered by “further expectations that major uncertainty would prevent the Bank of England from raising interest rates at the December policy meeting”.

GBPUSD started the session at 1.3258 but closed below that mark, finishing Tuesday at 1.3235.

GBPEUR saw little activity yesterday, opening the day at 1.1766 and closing at 1.1767.

EURUSD recorded a loss on Tuesday. The pair opened the session at 1.1269 and closed at 1.1247.

Ahead of next week’s central bank policy meetings, it’s possible the Dollar will improve further as the Fed maintain their aggressive stance. A survey conducted this week shows that 71% of American economists believe inflation will not fall to or below the Fed’s 2% YoY target rate “until the second half of 2023 or later”. With this being the case, it could be presumed the Fed will act to tackle this possibility in their meeting next week. Fed Chair Jerome Powell has already said that the Fed could “accelerate its unwinding of bond purchases that have helped keep longer-term borrowing costs low”. A faster tapering could “prepare the ground for an inflation-cooling interest rate increase as soon as the first half of next year – rather than the second half as previously expected”.

On the data front it’s a quiet schedule today. At 08:15 ECB President Christine Lagarde gave a speech, but this did little to impact markets. At 12:00 the US will release its latest MBA Mortgage Applications.

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