Market Update

Last week’s economic releases were fairly quiet up until Thursday when we heard from all three major central banks (the Fed, BoE & ECB) speaking all within the space of 30 minutes. Fed’s Powell confirmed a hawkish outlook for the U.S saying “it is appropriate to be moving more quickly” in relation to their monetary policy stance. BoE’s Bailey shut down any rumours of a balance sheet run-off stating that the central bank would only initiate quantitative tightening in calm markets and would stop if conditions changed. Over in Europe President Lagarde reaffirmed the importance of the June meeting for the central bank, as that could also be the end of their asset purchase program.

Off the back of negative retail sales combined with an already weakening pound, rates on Friday fell over 1.5% to 1.28300, levels not seen since 2020. The BoE is expected to raise its interest rates, but with consumer confidence hanging low, an income squeeze amidst low growth it is hard to see any soft landing for the economy.

Against the pound, the euro managed to slip below 1.1900 whilst holding onto the 1.07800 handle against the dollar. The deciding factor on where euro rates will lead is still gripped by Russia-Ukraine but more importantly how the ECB will react to the policy differential widening as both the BoE and Fed ramp-up rates. Leading up to the close of April, the only thing on the calendar that presents volatility is the CPI print for the Eurozone in April, apart from that the real heavyweight action starts from May.

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