Market Update

The USD surged by over 2% against both EUR & GBP after The Federal Reserve raised interest rates by a further 75 basis points last night, the fourth such rate hike in a row. Taking current interest rates in America to 4%. Comments made by Fed Chair Jerome Powell afterwards however was the main contributor to USD strength, with Powell stating that the battle against inflation will require borrowing costs to continue to rise. Recent economic data in The U.S now suggests that inflation will climb higher than previously thought, ultimately paving the way for further rate hikes in the coming months and now seemingly rules out a slowing down of hikes in December.

Keeping with Interest Rates, The Bank of England are expected to raise rates by 75 basis points later this afternoon. Taking rates back to levels last reached in November 2008, but more importantly it would be the Banks biggest rate hike since 1989. The risk for The Pound is that The Bank of England underwhelms again with a 50 basis point hike, keeping to a pattern of underwhelming rate hikes since they began hiking again just over 12 months ago. Even so, if a 75 basis point does take place today, markets are expecting a further hike of 75 basis points in December to support the path towards rates of 5%.

We end the week with the release of Non-Farm Payrolls in The U.S, which is the most highly sought piece of data in The U.S for the jobs market. Expectations suggest fewer jobs were created in October compared to the previous month but it should be noted that this release is also the most volatile within the economic data and will no doubt impact the USD as The Federal Reserve keeps a close eye on employment when considering future rate hikes.

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