Morning all
Limped to Friday! Leaving out EUR today, nothing more happening that I haven’t mentioned in the previous updates this week.
GBP
Yesterday we saw the biggest single interest rate hike since 1995, setting us at 1.75% for the time being. However the rhetoric afterwards could not have been more negative if they tried! The banks latest projections show the UK economy will slide into recerssion in late 2022 and won’t return to growth for the entire length of the forecast period – into 2025. This is an incredibly gloomy call and makes the Bank of England the first central bank to offically forecast recession. Large hikes do not necessarily mean GBP strength, just look at GBPEUR which lost over 0.8% post announcement.
Will other banks follow similar narrative as the year unfolds? They have to.
Markets are now pricing in an additional total of 1% by December, putting interest rates to 2.75%. However as above any positive sentiment associated with raising interest rates will be dissapated by elevated inflation and weak growth.
USD
Non farm Friday! 250,000 new jobs (bar agriculture) is the amount of new jobs expected to be created last month in the US and the results are out this afternoon around 1:30pm. Anything less than 250k, watch GBPUSD shoot up and anything higher expect USD to strengthen.
If I don’t hear from you beforehand, have a good weekend 😊
Best
J