US Fed In Focus This Week
The Pound to Euro exchange rate sustained a breakout above a key area last week which, when combined with the hawkish Bank of England (BoE) policy outlook, could encourage Sterling to take a run at new post-referendum highs above 1.22 in the coming weeks.
Sterling rose above the 1.20 handle before a poor December retail sales report prompted a Friday pullback against the European single currency, although this wasn’t enough to undo earlier bullish developments on the charts for Sterling.
In level terms, the firmer dollar tone is reflected in EUR/USD opening this morning in the lower half of 1.13-1.14, compared to its starting position last week just above 1.14. Meanwhile, cable (GBP/USD) is back down in 1.35-1.36 territory whilst the GBP/EUR starts off circa 1.1950.
Looking ahead to this week, with the market’s focus for 2022 very much on inflation and monetary policy, the first Fed meeting of the year will be the centre of attention. Data-wise, the core-PCE measure of US inflation (Dec) and Q4 GDP are some of the main releases. Other key highlights this week are the flash PMIs for January from the US, Eurozone and UK.