✈️ Download our latest Travel Playbook here. Unravelling the complexities of the travel industry in a globalised world. 🗺️

FX market take a breather after volatile trading week

( 3 min )

  • Go back to blog home
  • All posts
    All posts|Currency Updates
    All posts|Currency Updates|International Trade
    All posts|International Trade
    Blog
    Central Bank Meetings
    Charities & NGOs
    Currency Updates
    Currency Updates|In The News
    Ecommerce
    Fraud
    FX 101
    In The News
    International Trade
    Podcast
    Press Release
    Product Update
    Security & Fraud
    Special FX Reports
    Special Report
    Weekly Market Update
  • Latest

8 February 2022

Written by
Matthew Ryan

Matthew Ryan is Ebury’s Global Head of Market Strategy, based in London, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

Currencies took a breather on Monday following a very busy few days last week that saw no shortage of volatility.

T
he euro was stuck in a tight range against the dollar on Monday, having rallied above the 1.14 mark following Thursday’s hawkish message from ECB President Lagarde. The ECB made it clear that it was growing increasingly concerned with rising inflation and is now much more likely to raise interest rates in 2022 than it had been previously. Investors reacted by rushing to price in as many as five 10 basis point interest rate hikes from the ECB this year, while sending the euro near the top of the G10 performance tracker and back to its strongest position since mid-January. Whether such an aggressive pace of hikes is actually on the cards remains to be seen, but markets are clearly expecting big things from the Governing Council this year, setting up their next meeting in March to be a highly important one.

Last Friday’s US payrolls report provided a bit of relief for the US dollar following its recent sell-off, although the rebound in the greenback was minimal, and the currency has been one of the worst performing majors in the past week. 467,000 net jobs were added in the US economy last month, well above the 150k consensus. While highly impressive, the data doesn’t actually change things too much – the Federal Reserve were already expected to hike interest rates in March and at an aggressive pace during the remainder of 2022. What it does do, however, is suggest that the impact of omicron on the US economy looks likely to be very minimal, and that bodes well for global growth.

Meanwhile, sterling has hovered around the 1.35 level versus the dollar in the past 24 hours or so, retracing part of its gains following Friday’s payrolls report. So far, the ongoing political pressure on Prime Minister Boris Johnson doesn’t appear to be reflected in the pound, which continues to trade near the top of the G10 performance tracker for the year – although it has been overtaken by the euro in the past few sessions. There is a general feeling among investors that even a change of leadership wouldn’t alter the government’s policies too much, if at all, and that provides little reason to fear a deviation from the political status quo. Sterling instead continues to take its cue from central bank expectations. Swap markets are now pricing in the equivalent of five additional 25 basis point hikes from the Bank of England this year, which is providing plenty of reason for investors to long the pound.

There’s little in the way of major economic data releases this week, aside from Thursday’s US inflation print, which will be very closely watched by market participants.

To stay up to date with our publications, please choose one of the below:

📩 Click here to receive the latest market updates
👉 Our LinkedIn page for the latest news
✍️ Our Blog page for other FX market reports

SHARE