Market Update

A quick recap of last week. We saw the Fed raise rates to 0.5% and the Bank of England follow suit raising rates to 0.75% both events widely anticipated by markets and priced in.

The tonality for both central banks however were far from similar, the fed Chair Jerome Powell was extremely hawkish on the state of the U.S economy particularly the labour market.

However, Andrew Bailey was soft in tone regarding the U.K and future tightening within the economy which led to the dramatic drop in sterling pairs across the board with cable trading now at 1.3175 at the time of writing.

Over in Europe we’re seeing a declining sense of faith in the economy as Russia-Ukraine tensions seem to be lingering around causing rates on the euro to drop against major pairs. Euro dollar is trading at 1.1050 and pound euro at 1.19 both close to lows for the year. 

Europe’s Achilles hill, being energy reliance on Russia, is what has got them into the current turmoil they are in making it hard for the ECB to adjust monetary policy with rates in negative territory.

The real question is what effect will this have on the euro? Well, unless geopolitical tensions ease and talks are made, we can expect a lower rate across both euro dollar and pound euro as the countering central banks continue to raise rates.

This morning we have President Lagarde’s speech which we expect to have little or a muted effect on rates, whilst later within the afternoon Jerome Powell talks.

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