Blog


Market Update

UK CPI surged to 6.2% for Feb YoY reaching a 30 year high for the pound. As expected, CPI data reaffirmed the consensus of an overheating economy led by energy prices with 8% set as the peak of inflation expected in May and 10% forecasted to be hit around October. PPI data unsurprisingly saw another consecutive beat compared to last month’s PPI print.

Gov Andrew Bailey speaks at noon regarding the state of the economy’s battle against inflation amongst an income squeeze. Cable shed some of yesterday’s gains trading as low as 1.3220 as investors now fear that after two consecutive rate hikes and inflation continuing to rise, monetary policy actions are having little to no positive effect on combating historical inflation levels.

It’s a very busy day for the pound, shortly after Gov Bailey speaks, we have the annual budget release for the UK.

The Chancellor Rishi Sunak will deliver a budget, which will include a £1200 per head increase to service the National Debt.  The Institute of Fiscal Studies (IFS) predicts that debt interest payments could surpass £84B, which would be £31B or 41% more than was predicted back in October.

The Chancellor is under pressure to announce more support for household and businesses, which will be extremely tough given the BoE recently warned that inflation could surpass 10 per cent by the end of 2002, a level not seen since early 1980.  Inflation has a knock on effect on Government borrowing….£500B of the £2.3T National Debt is pegged to the Retail Prices Index.

The IFS predicts that RPI inflation alone will add a further £20B to next year’s debt interest spending, with the recent interest rate hike also further adding to the Government’s borrowing costs.

A change in tonality from Fed Chair Jerome Powell caused a recovery in risk assets yesterday. Leading investment bank Goldman Sachs are now projecting the Fed to raise rates by 50 bps in their next two meetings following hawkish comments from Jerome Powell yesterday.

Powell stated how there is an obvious need to move “expeditiously”, to return monetary policy to its neutral level. The comments caused investors to shine the light on risk assets once again. Capital flowed from the dollar to G7 currencies due to Powell’s comments shifting equities higher and the dollar lower as of a result. Yesterday cable pushed back above 1.3250 level and Euro dollar trading above the 1.1030 level.

Over in Europe President Lagarde’s speech had a muted effect on euro rates, however with the continued slow progression of talks between Ukraine and Russia, as well as a weak dollar, we saw pound euro regain losses from the prior week trading at 1.20. Just 2% below the year high.

Leave a Reply

Your email address will not be published.

What's Going On?

Currencies 4 You Ltd is a company registered in England and Wales (registered no. 06866898). Registered office: Regus House Victory Way Admirals Park, Crossway, Dartford, Kent, DA2 6QD. Currencies 4 You Ltd Payment and Foreign Currency Exchange Services are provided by Currency Cloud Limited and Equals Connect Limited. Currency Cloud Limited. Registered in England No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money. FCA registration number: 900199. Payment Services are provided by Equals Connect Limited, registered in England and Wales (registered no. 07131446). Registered Office: Vintners’ Place, 68 Upper Thames St, London, EC4V 3BJ. Equals Connect Limited are authorised by the Financial Conduct Authority to provide payment services (FRN: 671508). Payment services for Currencies 4 You Ltd are provided by Sciopay Ltd. Sciopay Ltd is a company incorporated in England & Wales. Registration No: 12352935. Sciopay Ltd is licensed and regulated by HMRC as a Money Service Business (MSB). Licence No: XCML00000151326. Sciopay Ltd is authorised by the Financial Conduct Authority as an Authorised Payment Institution. Firm Reference Number: 927951. | Terms and Conditions | Privacy Statement | Careers