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Market Update

• Posted by currencies in Bank of England, Brexit, coronavirus, Currency, Dollar, Economy, EUR, Fed, GBP, Sterling, UK, Uncategorised
• February 3, 2022
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The Pound has opened this mornings session slightly lower against The USD after disappointing earnings results for Meta, previously known as Facebook and has therefore seen a sell-off in tech and social media stocks, with people buying into the USD. We do expect GBP to recover moving later into the afternoon as The Bank of England have their Interest Rate meeting at Midday.

Expectations suggest The Bank of England will increase Interest Rates from 0.25% to 0.5%, bringing a first back-to-back rate hike since 2004, due to inflation climbing to a 30 year high. This hike to 0.5% has pretty much been priced in however, so any strength for Sterling will come from any potential forward guidance outlined by Andrew Bailey in the conference afterwards. As the warmer months come into sight, it will be interesting to see where The Bank of England see’s inflation heading to in the near future and whether more rate hikes will be needed to keep it under control.

Straight after The Bank of England, we have the ECB’s Interest Rate decision where inflation has been a major concern with data releases on Wednesday showing consumer prices unexpectedly rising by a record 5.1% January. This is more than double the 2% target. It should be noted however, that The ECB are reluctant to make any moves at this meeting, but again the press conference after will be of huge importance in relation to when President Lagarde feels they can start increasing rates.

For the rest of the week, the focus will be on The U.S with their monthly Non-Farm data due out tomorrow. ADP Employment Change was released yesterday in The U.S, this measures the level of Non-Farm Private employment and came out horrific for The U.S, indicating that actually tomorrow’s data for employment will also follow suit. However, as we’ve seen over the past 6 months, the employment figures in The U.S. have been extremely volatile so we can expect The USD to be volatile off the back of this.