The Weekly Round-up

In a week with plenty of potential flash points for the markets it is no surprise that we have seen a week full of volatility. The main talking points of the week being the ECB interest rate decision on yesterday, Jeremy Hunt and Co.’s spring budget out Wednesday and then the US jobs data out later today.

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The general trend of the week has been a move towards Sterling strength, which makes a nice change from the recent stagnation in the markets. The key takeaways being a further cut to National Insurance, further tax on vapes and tobacco, an increase in the maximum Child Benefits wage to 60,000 a year and an increase to the VAT threshold for to ￡90,000. The budget did not create a large push upwards for the Pound, I would assume, due to many of the key decisions being relatively well published before release and a lack of real surprises. However, that didn’t stop the Pounds gaining further ground against the USD and EUR with it reaching highs not seen since last July against the USD. Considering expectations were for a weaker Pound over the short term it is an impressive rally.

On Thursday we had the latest ECB interest rate decision. The first one, in recent times anyway, that there was real speculation of a rate cut held some weight. They opted for to hold rates however in a speech made by the President Lagarde she did indicate that we would see a rate cut by summer with her also touting June as the most likely time. This caused the Pound to push back and break through key psychological levels, meaning the recent stagnation finally came to an end.

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The USD is probably the loser of the week with them losing considerable ground against both the EUR and GBP, following a period of relative Dollar strength. Later today we will see the US post their latest non-farm employment figures. These will be particularly closely watched due to recent interest rate cut expectations dropping from 6 cuts to 3 for the year. Strong results here will help cement that narrative and likely cause a USD rally.

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As we look ahead to next week, a return to US data domination is on the cards. They will post their latest CPI, Retail sales, Consumer sentiment and PPI, all key inflationary indicators. Strong results across the board could result in a retracement for the GBP and EUR against the USD. The main talking point for the UK is the latest GDP figures out Wednesday morning, it does however seem unlikely to be a positive figure and I would therefore not expect to see any great Sterling rally.