Market Update

GBP continues to be vulnerable as we head to The Bank of England’s Friday deadline when they are due to bring their emergency support for bonds to an end. BoE Governor Andrew Bailey stated at the beginning of this week that the support would draw to a close this Friday, however there seems to be confusion within the markets as to whether there will be an extension to the emergency bond buying scheme to prevent a further sell-off in the bond market and more importantly in The Pound.

Across the pond The US Dollar continues to hold it’s own after yesterday’s September meeting minutes showed that policymakers all agreed on the need for more rate hikes in order to bring inflation further under control. The aim currently is for The Federal Reserve to continue hiking rates to an area in and around 4.5% as quickly as possible, with the view of then remaining at that level for some time in order to assess the economy for future possible hikes.

Later this afternoon we have the release of inflation data in The U.S, which is expected to remain above 8% as of September which would still be there or thereabouts at a 40-year high. Actual projections suggest Inflation will have dropped slightly from 8.3% but whether it comes out marginally lower than this or potentially even higher, The Fed Reserve are still set to raise rates in 3 weeks’ time which will only provide further strength for The USD.

Sticking on inflation, Germany have seen their inflation figures reach 10%, alarmingly higher than where it was this time last year. With The European Central Banks next meeting in 2 weeks, markets are now seemingly fully pricing another rate hike of 75 basis points and a total of 230 basis points of increases by Mid-2023.

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