The Weekly Round-Up

As another turbulent week draws to a close, the Pound is once again on the back foot fighting an uphill battle. Yesterday we saw the BoE hike their interest rates 50bps, being the BoEs’ tenth consecutive hike. The key note from the hike being in the conference afterwards, indicating the end of the tightening cycle is near. Even though this could be considered a good thing, the Pound still seemed to take a beating, versus the majority of currencies, being beaten back into the 1.11s versus Euro. Many top economists think it may be a while until we see a substantial return for Sterling strength. The UK macroeconomic releases are struggling to compete, following a host on domestic problems including strikes and recruitment fears. The IMF have warned about the economic outlook of the UK, and have cut the UKs growth forecast from 0.3% growth to a retraction of -0.6%, lending to the idea of current recession. 

Today in the US is payrolls day. Following the slight weakness of the US Dollar, recently seen versus Sterling being over 1.24, US Dollar ground has regained ground as the Fed hiked their interest rates a further 0.25% alluding their tightening cycle, as long as data allows, will be drawing to a close soon. This is supported by the US Weekly Jobless Claims released Jan 28th, which indicated the resilience of the US labor market with data highlighting unemployment insurance claims fall to a reading of 183k. The Federal reserve have indicated they will monitor markets closely, and move according to data rather than what peers “expect” them to do. Markets expect them, should data allow, to start unwinding their current position to avoid slowing down their economy. 

Last, but certainly not least, we look to the Eurozone, whom have also recently seen their own European central bank, hike their rates 0.5%. The Euro has remained strong versus the majority of counterparts, and with further planned 50bps in March, depending on further data releases, Euro strength could become a continuing trend as the ECB will “Evaluate the subsequent path of its monetary policy” meaning if they need to, they will go further. This is another step to combat their own battle against inflation, stating “significant” further raises are on the table should they be needed, but expectations are that March could see their final hike.