Monetary policy: Chair Powell has effectively preannounced a 25bp move, the market is weighing the dilemma of inflation targets vs potential financial conditions/growth shock from the geopolitical uncertainty.
The market has priced-out a 50bp Fed hike for March, but implications for the subsequent rate path are less clear.
Geopolitical tensions would be unlikely...
News:
UK: The Bank of England voted to raise Bank Rate by 25bps to 0.50% last Thursday. In a surprisingly hawkish turn, 4 of 9 MPC members voted for a 50bps hike, and alongside messaging
that Bank Rate would continue to rise in the coming months, have sent the signal that the MPC is impatient to see
rates higher. Alongside Thursday's decision, the MPC confirmed...
News:
US: FOMC made no major policy changes at its meeting. The Committee unanimously agreed to keep its target range for the
federal funds rate unchanged at 0.00% to 0.25%.
Fed signaled that the first rate hike would likely come at its next meeting on 15-16 March and that net
asset purchases would cease in early March as planned. Fed Chair Jerome Powell said that...
News:
UK: Events in Ukraine and the global equity correction have shifted the focus from
inflation/tightening over the last week and more towards a flight to safety. GBP/USD has a much
higher positive correlation than EUR/USD with global equity markets - such that EUR/GBP is
higher as equities are lower. The bounce in EUR/GBP may thus reverse should equities...
News:
UK: Equity weakness hits pound even as BoE moves closer to another hike.
The pound has corrected lower over the past week driven by more risk-off trading
conditions. It has been the strongest sustained period of positive correlation between cable and global equity
market performance since 2013, and highlights that the pound is vulnerable to further
near-term...
News:
UK: The UK has just released some better UK activity numbers for November, including monthly
GDP, industrial production and services indices. Even the trade deficit narrowed. This suggests
the UK economy might have had a little insulation heading into the Covid-restricted December
period. A 25bp BoE rate hike is still priced with an 80% probability for the...
News:
US: Yesterday, Fed Chair Jerome Powell indicated that the Fed’s net asset purchases will likely end in mid-March, interest
rates will rise this year (he was guarded on the precise timing of the first rate hike, but said the economy was making “very
rapid progress” towards maximum employment), and balance sheet run-off could “perhaps” start before year-end...
UK: The markets continue to price more than 100bp of Bank Rate hikes for 2022
following December lift-off. Economists look for two 25bp rate increases in
2022 – February and November
British Prime Minister Boris Johnson said that they are looking at the possibility of reducing the quarantine period to five days from seven.
US: The December FOMC minutes indicate...
News:
US: Wed fed minutes were very hawkish. We will see faster rate liftoff, 3 rate hikes are anticipated for 2022.
"A few participants raised concerns that a recently flat yield curve could adversely affect interest margins for some financial intermediaries, which may rise financial risks." - They are practically saying that we may come into the recession.
Most...
News:
UK: GBP-USD is firmer as UK markets reopen for the first trading day of 2022.
The government appears unlikely to increase restrictions due to Omicron. Johnson said today that the UK is in the fastest growth of the covid cases, he also mentioned that UK has a chance to ride out Omicron wave without shutting down.
Relatively heavy short GBP market...
News: 10-year US government bond recorded the largest yearly increase since 2013 and ended 2021 above the 1.50% threshold. This, along with the worsening COVID-19 situation in the United Kingdom exerted some downward pressure around the GBP/USD pair.
Britain has been reporting a record number of new COVID-19 cases over the past few days, which could force the...
News: USD demand exerted pressure amid the worsening COVID-19 situation in the UK.
Britain reported a record number of cases amid an alarming spread of the Omicron variant.
Data: UK Nationwide HPI 1.0% 0.5% 0.9% better than expected
US Initial Jobless Claims 198K 208K 206K
Chicago PMI (Dec) 63.1 62.0 61.8
News: GBPUSD pushed through monthly highs. Markets are pricing out more bearish scenarios for covid restrictions next year as Omicron seems to be less severe. UK markets are currently shut for the Boxing Day bank holiday.
Data: No major data
News: Receding Omicron fears assisted GBP/USD to gain some positive traction on Monday.
Reports suggested the new strain may be less severe than the previous Delta variant. This comes on the back of a surprise rate hike by the Bank of England.
Expectations that the UK government may opt to impose new restrictions amid the fast spread of the Omicron variant in...
Last week, the FOMC left interest rates on hold but confirmed its hawkish shift by doubling its tapering of asset purchases and it signaled earlier and more rate hikes.
Some important bullet-points which we can assume from the FOMC report:
From what we know there is going to be at least 1 rate increase in 2022 - one is guaranteed.
The median forecast is...
Last week BoE increased rates by 15bp to 0.25%, the first rate hike since August 2018.
The BoE opted to hike rates by 15bps with an 8:1 vote. Given that market were only 50% priced for a hike, it
was met with a strong move in sterling rates.
With the MPC's confident discounting of Omicron effects on the outlook, it's clear that
they've set themselves on a path to...
