Market Update

Anticipation is at its highest amongst Investors as we await an expected rate hike to 0.5% today from the Fed, in a lacklustre attempt to get inflation under control which is at a 40 year high. Wall Street bank Goldman Sachs see a further 7 rate hikes ahead for the Fed’s this year with expectations to get rates in the U.S to 1.75% by year end.

Sterling remains flat at a 16-month low against the U.S dollar however with the Bank of England advancing with their rate hike plans this could give sterling a rebound off of recent lows sited in the markets. Markets are pricing in another 25-bps rate hike this Thursday that will take rates to 0.75% following the Fed’s meeting today where we also expect a 25-bps hike.

The ECB seem to be the outcast amongst the major currencies as it is unclear whether they will go ahead with rate hikes in Q4 ’22 or whether the Ukraine-Russia war has shifted rate hikes into Q1 ’23. We can expect to see GBP/EUR trade towards and above the 1.20 handle as the BoE continue to hike rates successively and EUR/USD trade towards and below the 1.0800 mark if the Fed’s monetary plan remains aggressive in the inflation battle.

However, due to turbulent markets and geopolitical factors any shift in sentiment can lead to an un-factored event but as it stands holding the euro against the dollar or pound is the least attractive alternative.

Oil prices plunged over 7% on fears that strict Covid lockdown measures in China the world’s largest crude oil importer will lower the demand for oil.

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