Foreign exchange markets saw strong waves of volatility yesterday as participants returned to action after the almost 2-week holiday period. The first port of call was to load up on US dollars. The greenback saw huge inflows against all its major counterparts. This took the pound down to the low $1.19s, narrowly avoiding breaking into the $1.18 handle. EURUSD also succumbed to the pressure, dropping 1.30% within the first few hours of European trade.
Equity markets headed in the opposite direction with buyers seeing European exchanges rally to the tune of 1.5% – 2%. This continued into the North American session but ended abruptly around mid-afternoon as fresh flows entered the marketplace. Stocks reversed and so did the greenback. Cable pushed back towards $1.20 and EURUSD to $1.06.
Today’s trading session will see focus on the Fed minutes released tonight at 7 pm. Will the FOMC deliver a hawkish or dovish message?
Written by Viv Savani. 6:54am, January 4th 2023
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