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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