IFX Market Report: Wednesday 10th March 2021

The U.S. 10-year treasury yield settled around 1.54% on Tuesday after hitting a high of 1.62%. This move caused the Dollar to soften against its peers, enabling Cable to achieve subtle gains towards 1.39 and EURUSD reach the 1.19 handle. It was also a disappointing day for the Euro zone economy; the latest readings show GDP fell by a devastating 0.7% quarter-on-quarter. The YoY figure also missed estimates coming in at 4.9%, forecasted at 5.0%. Reuters note that “the main downward pull came from household consumption which subtracted 1.6 percentage points quarter-on-quarter from the final quarterly result and 4.1 points from the annual number”. It is important to also mention that because of lockdowns and COVID-19 restrictions, the labour market has suffered dramatically, with employment growth slowing to 0.3% quarter-on-quarter from a 1.0% growth in the previous three months.

After a tough start to the week GBPUSD started Tuesday trading at 1.3834 and was able to test the 1.39 mark, closing the day at 1.3892. It was Dollar weakness as oppose to Sterling strength that caused this move, and with the economic calendar light this week, Cable could trade in a tight range from this point.

GBPEUR was also able to gain some upside yesterday, reaching a 13-month high of 1.1695. The pair started the session strong at 1.1667 and went from strength to strength, finally closing the day at 1.1690.

EURUSD also made substantial gains in the London session, opening at 1.1856 and closing at 1.1884. After the close the pair was able to break through the 1.19 barrier.

On the data front U.S. Inflation will be today’s focus. Released at 13:30, Core Inflation is forecasted at 1.4%, with a previous of the same figure. The Inflation Rate YoY is estimated at 1.7% with a previous of 1.4%. Some economists believe that recent rise in bond yields indicate that financial markets fear Joe Bidens $1.9T fiscal package may stimulate the U.S. economy too much and lead to unwanted inflation. Thus, today’s reading is eagerly anticipated and will be closely analysed.