Market Update

Yesterday morning we saw GBP edge up slightly across the major currencies with inflation hitting more than a nine year high, which led to further expectation for The Bank of England to act sooner rather than later with hiking Interest Rates. Consumer prices rose by 3.2% last month, the biggest monthly rise in over 20 years, with a number of analysts pointing to the Eat Out to Help Out scheme driving prices lower this time last year. The Bank of England expect Inflation to hit 4% by the end of the year, although any jump to 4% before December would place immense pressure on The BoE to act accordingly.

Sterling has also gained support this week from employment data, with the number of payrolled employees in The UK climbing to Pre-Pandemic levels. Coupled with U.S. inflation growing at it’s slowest pace in 6 months, GBP is very much holding it’s own.

One factor for GBP holding it’s own as been The USD. The jobs market has been a million miles away from where it was in the 3 months leading up to July when 1 million jobs were being created. Both August & September saw lower than expected figures on Non-Farm Payrolls and after last week’s continuing claims being higher than expected, today’s initial and continuing claims are again set to disappoint. Suggesting an economic recovery is far from being reached. Next up for The U.S. is Retail Sales for August. Expectations are showing a slight improvement, however with figures still below par it’s not much to shout about unless we see massive gains on the high street. Any continued uncertainty from residents in America won’t bode well for the economy moving forward.

With inflation being the focus for most central banks, Friday brings the release of The European Central Banks inflation figures. As with The UK & The States, Europe look set to overhit the 2% target for August with figures actually set to hit 10 year highs at 3%. The ECB have already talked up their ambition to slowly draw back their Pandemic Emergency Purchase Program with the end game of finishing in March 2022, as well as having hopes of being able to raise rates sooner rather than later. All eyes from The ECB will be solely focused on the contributors to inflation rising, as well as firmly keeping one eye on developments elsewhere to make sure Europe doesn’t fall too far behind.

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