IFX Market Report: Tuesday 19th October 2021

The latest Chinese GDP data forced global markets into decline on Monday, creating a downbeat tone in the foreign exchange market. Chinese economic growth in Q3 “slumped to its slowest pace in a year, as property slowdown and energy shortages highlighted rising pressure on policymakers”. Despite outperforming all other developed countries in 2020 due to the COVID-19 pandemic, the latest GDP figures from China indicate a “loss of momentum, with industrial production growing 3.1% in September and edging just 0.1% higher month on month”. Despite the risk-off tone in the market, the Dollar was able to claw back some modest gains against Sterling, but not strong enough to gather sustainable momentum against the Euro. The Euro performed impressively to start the week, making ground against both the Pound and Greenback on the day.

GBPUSD started the day at 1.3746 and made a subtle loss in the session, closing at 1.3725. While the US Dollar capitalized on Monday, Sterling was able to limit any significant upside due to the increasingly high chance of a BoE rate cut coming before 2022.

GBPEUR also made a loss yesterday. The pair started the week at 1.1856 and close at 1.1823.

EURUSD was able to make minor gains on Monday. The pair opened at 1.1592 and closed at 1.1608.

On the data front, there are limited economic releases of note but an abundance of speeches from policymakers. At 13:00, ECB member Fabio Panetta will be speaking, followed by BoE Governor Andrew Bailey a 13:05. Investors will be looking for any indicators as to when exactly the BoE will be raising rates and changing policy. If Bailey is to disclose any telling information, there is a high chance Sterling will see heightened volatility. Later in the afternoon from across the pond, Fed members Daly, Bowman, Bostic, and Waller will all be speaking.