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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Rate Hikes, Sterling, UK, Uncategorised
• October 27, 2023
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No surprises yesterday when ECB (European Central Bank) decided to hold rates at 4.5%. President Christine Lagarde mentioned that there could be further actions in the future but that current market situation did not require monetary actions. In September we saw inflation levels drop drastically for a number of European nations. Market speculations is now that ECB have ‘over-tighten’ (raised rates to high) and that ECB likely will be one of the first major central banks to start cutting rates in 2024 to ease of pressure on households and business.

This week we have seen USD/JPY break the vital levels of 150. Last time this happened was last year in October and the Japanese government intervened to temper further market disruptions. So far this time, we have not seen any signs of interventions and keep in mind that BOJ (Bank of Japan) do hold a meeting on Tuesday, currently in negative territory when it comes to interest rates (-0.1%). While on the topic of central banks meetings, we also have the Federal Reserve and BoE meeting next week. At the moment, the only monetary actions that looks possible would come from BoE with 25 basis points.

Today main data release is from the US and Core PCE Price Index (Personal Consumption Expenditure) with recent developments seeing inflation pressure coming down in the US, PCE is expected to fall from 3.9% to 3.7% for September. US has been adjusting better to higher interest rates levels than both UK and Europe, seeing a better performing economy and healthier labour market. Recent concerns for upcoming recessions across the globe has caused a sell off on stock markets in the US, Europe and the UK, which has benefitted the USD as it’s the most valuable (market share).

Next week is packed with major data releases and Central banks meetings. Current market momentum suggest any exposure against USD, whether its in GBP or EUR should take actions sooner rather than later.