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Market Update

The Pound has continued its recovery this week after positive employment data removed fears of the potential impact from the furlough scheme ending in October. The potential fall-out from furlough was cited as the main reason for The Bank of England resisting a rate hike earlier this month, and with inflation surging over 4% for the first time in a decade bets have resurfaced that The Bank of England will in fact raise rates by 15 bps in their December meeting. All eyes will now be focused on the Retail Sales release tomorrow. A strong Retail Sales will only further support a rate hike showing consumers would be able to afford a rate hike when prices eventually revert to normal levels.

Across the pond, inflation hit a record 30-year high in October, and with better than expected Retail Sales released on Tuesday we’ve also seen bets raised that The Fed Reserve will hike rates sooner rather than later. Initially it looked like The Fed would leave rates untouched until at least June 2022 but with inflation continuing to surge and consumers still spending it’s painting a similar picture of The UK’s economy. Weekly jobs data released this afternoon won’t be watched as closely as it has recently, but will still be a key element for The Fed to ensure a rate hike takes place at the right time.

The Euro of late has been suffering against both GBP & USD, as several countries within Europe have reimposed partial lockdowns for the unvaccinated percentage of the population as they continue to grapple with this fourth wave of Covid which is finding its way across The Bloc. Inflation data released yesterday also came out above 4% for Europe as the world as a whole continues the struggle against rising prices and supply shortages. However, although inflation is climbing The European Central Bank seem adamant to leave rates unchanged for pretty much the duration of 2022 which could potentially pave the way for a weaker Euro against both currencies.

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