Sterling extends gains

The British pound has posted gains for a third straight day and punched above the 1.36 line. In the European session, GBP/USD is trading at 1.3616, up 0.25% on the day.

A busy week in the UK wraps up on Friday with the release of January retail sales. Investors are expecting a massive rebound of 8.7% y/y, after a reading of -0.9% in December. If the estimate is within expectations, we could see some upward movement from the pound. A strong reading would be an encouraging sign of solid growth in the first quarter.

The FOMC minutes didn’t contain any surprises, and market reaction was muted. Officials indicated that interest rates are coming soon, strongly hinting that lift-off will take place in March. It’s clear that the March lift-off will mark the start of a series of rate hikes this year, but the exact number of moves remains to be seen. The Fed also plans a significant reduction in the balance sheet, which has ballooned to nine trillion dollars as a result of massive bond-buying in an effort to stimulate growth during the Covid pandemic.

The Russia/Ukraine border remains extremely tense, although there was no invasion on Wednesday as feared. The US has rejected as “false” Russia’s claim that it has moved forces away from the border and reports of a skirmish between Ukrainian forces and Russian-back separatists briefly gave the US dollar a slight boost. Any developments on the border will be felt on the financial markets, as the threat of invasion hangs over the financial markets like an ominous dark cloud.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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