Risk appetite returns to the market

A week that started with talk of the possible return of stagflation to haunt the UK economy, the mood of the financial markets has again turned positive in the last 24 hours that has seen both the US Federal Reserve and then the Bank of England hint at earlier than expected interest rate rises and Evergrande, the giant Chinese construction company that missed a stakeholder payment on Monday and threatened to default on a bank loan interest repayment on part of its gargantuan $305 billion debt today get a stay of execution as it was given another 30 days to meet the payment.

As a result of the brightening market sentiment, the Pound enjoyed a bounce in the foreign exchange markets rising to within half a cent of the last 30-day high and gained back over a cent against the greenback.

The US Federal Reserve's official interest rate predictions now show that the Fed now expects to increase US interest rates three times in both 2023 and 2024 despite downgrading the growth forecast for the US economy for 2022 from 7% to 5.9% and raising its inflation forecast to 4.2% in 2021, more than double the 2% target rate?

Earlier today, the nine member Monetary Policy Committee (MPC) of the Bank of England (BoE) left UK monetary policy unchanged as expected and voted unanimously (9-0) to keep UK interest rates at their all-time record low of 0.1% but voted 7-2 to keep the level of bond purchases, the scheme known as Quantitative Easing (QE) unchanged at ￡895 billion with?Dave Ramsden joining Michael Saunders (who advocated the same back in August) in voting for the remaining portion of asset purchases, scheduled between now and the end of the year to be cut back as soon as possible.

Market expectations of an increase in UK interest rates in 2022 have now been brought forward from May to February boosting the Pound against its two major currency rivals which are predicted not to move on tightening monetary policy in either the USA or the European Union (EU) until some time in 2023.

With Boris Johnson also gaining President Biden's agreement to lift the US travel ban on double-jabbed Brits to once again travel to the US from November onwards and Chancellor Rishi Sunak hailing London’s bounce back from the Covid pandemic as data showed the British capital is sprinting ahead of rival European tech hubs with?London attracting more venture capital investment to its start-ups than anywhere else in Europe and now boasts more unicorns – firms valued at more than $1bn – than France and Germany combined.

More good news for the UK economy with news that the Organisation for Economic Co-operation and Development (OECD) is now forecasting that the UK economy will grow faster than any other G7 nation in both 2021 and 2022.

A month ahead of his Budget, Chancellor Sunak received the welcome news that?￡1.3 billion has been returned by firms who either overclaimed or decided they no longer need payments through the furlough scheme.

This week's quote is from the great Sir Winston Churchill "However beautiful the strategy, you should occasionally look at the results".

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