Market Update

GBP struggling to keep pace against the EUR this week, currently hovering around 1.1450. Yesterday raised concerns after a number of pension funds find that the government’s plan lacked investment opportunities and also expressed their concern of the risk sentiment when it came to sectors. Markets were quick to react, speculating that liquidity will be allocated overseas and the GBP/EUR broke the resistant levels of 1.15.

Yesterday afternoon Federal Reserve chairman Jerome Powell expressed his view on US economy and monetary actions. Hearing Powell talking positive about the economy’s growth rate and that it’s dealt with higher interest rates better than anticipated. He was somehow more careful when it came to forward guidance and said that the Federal Reserve currently is waiting to see the effects of the latest rate hikes and we should see further evidence in near future. He was hopeful that inflation should keep on coming down but could not tell whether interest rates has reached it’s peak or when a potential pivot (cut) on rates will occur.

This morning we saw poor figures for both UK retail sales and consumer confidence. Squeezing GBP against both the USD and EUR. A combination of economic releases earlier in the week, showing that inflation figures for September are more ‘stubborn’ and did not decline as BoE had hope for after endless interest rate hikes. While average earnings did not increase like the last few months, we can see signs of an underperforming economy in the UK. Leading on towards Bank of England’s next interest rate decision, putting pressure on what path they will take. To force further pressure on economic activity and consumers or tackle inflation levels. As it stands right now, the likelihood of a further rate hike is less likely and a pause of rates to assess the future is more likely to expect from Bank of England.

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