IFX Market Report: Wednesday 9th February 2022

Foreign exchange markets once again traded flat on Tuesday as investors await a busy schedule of economic data releases on Thursday. Until then, following last weeks (somewhat) surprising central bank meetings, investors have had little substance to give them direction. After a steady couple of days, the Euro finally started to drop off, only “a day after European Central Bank President Christine Lagarde tapped down expectations of aggressive interest rate hikes that have spooked bond markets”. Last week’s shockingly hawkish tone from Lagarde “caught markets off guard and sent yields soaring on Eurozone debt in anticipation rates could rise faster and higher than previously expected”. On Monday however, speaking to Governing Council in Frankfurt, Lagarde appeared to contradict her statement on Thursday, noting that “there is no need for big monetary policy tightening in the Eurozone as inflation is set to fall back and could stabilize around 2%”. Despite claiming that the ECB may be willing to change their stance on inflation last week, on Monday the central bank clearly stated that “there are no signals that inflation will be persistently and significantly above our target over the medium term, which would require measurable tightening”.

Despite the Euro declining slightly in the session, GBPEUR traded in a tight range on Tuesday and closed close to where it opened. GBPEUR opened at 1.1873 and closed at 1.1872.

EURUSD also saw little action yesterday. The pair opened at 1.1405 and closed at 1.1414.

GBPUSD gained some minor upside on Tuesday – opening at 1.3541 and closing at 1.3551.

On the data front it’s another quiet schedule today. At 07:00 Germany released its Balance of Trade for December. This afternoon, starting at 12:00 the US will publish its MBA Mortgage Applications, followed by Wholesale Inventories at 15:00. Lastly, at 17:00 Fed member Mester will be speaking.

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