GBP
The pound seems to have kept up with its bullish run of 1.200 GBP/EUR from the start of this week, despite the inflation rates rising to 5.2% and the relaxing of Covid restrictions.
Yesterday, the Governor of the Bank of England, Andrew Bailey made a speech at the Treasury Committee meeting. Predicting an upward trajectory for inflation over the next few weeks. With the Bank of England’s next meeting happening on 3rd February policy makers are set to decide on whether to increase interest rates again or to leave them as they are.
Economists predict CPI inflation could continue to hike, which could peak to over 7% in April. However, Andrew Bailey has said the Central Bank will do everything it can to benchmark Inflation rates.
This week we also saw Prime Minister Boris Johnson announce the relaxing of Plan B measures. With Covid Passports, working from home and face masks to be worn in public all scrapped. The prime minister also stated, the government intends to terminate the legal requirement to isolate after testing positive for Covid, when current guidelines expire on 24th March. However, this date could be brought forward, should the data allow. This comes after the prime minister came under scrutiny for attending for a ‘meeting’ (party) during the midst of lockdown.
With measures easing, we could potentially see some market volatility.
EUR
The Euro zones annual rate of inflation rose by 5.5% in December, according to the EU Central Statistics Office findings released yesterday. This is an increase of 0.2% recorded in November and is the highest annual rate since April 2021.
The European Union’s Statistics office Eurostat have claimed that energy is the main cause of increase in the Euro zone inflation. Head of the European Central Bank Christine Lagarde has also commented on the high inflation in the Euro zone. Stating “This will stabilise and ease gradually in the course of 2022.” She was then asked to give her policy to counter the price squeeze, to which she responded. “The cycle of the economic recovery in the U.S. is ahead of that in Europe. We thus have every reason not to act as rapidly and as brutally that one can imagine the Fed would do,” she said, adding that inflation, too, was higher in the U.S. “But we have started to react, and we obviously are standing ready, to react by monetary policy measures if the figures, the data, the facts demand it,” she said.
Today we can also see the President of the European Central Bank give a speech, with the European Central Bank consumer conference following shortly after. These events could spark some movement, should the reading be high the Euro could move Bullish.
USD
The EUR/USD pair trades around 1.1310, whilst GBP/USD trades 1.1620.
Housing starts data was released by the US Census Bureau on Wednesday this week, showing an unexpected increase by 1.4%. Housing demands in the US remains strong, despite prices for materials being through the roof and supply shortages due to the Pandemic.
United States jobless claims data was released yesterday afternoon, showing the highest numbers recorded since October 21, with Omicron variant hitting the United States hard. Numbers reached 286,000 which is a vast increase from reported numbers of 231,000 just the week before. It seems US businesses and workers are grappling with the Omicron outbreak.
The Federal Bank is said to meet next week, to shed some light on the ending to the quantitative easing. We can expect to know more by Wednesday 26th January. Many speculate the Federal Bank is to raise interest rates in March and throughout the remainder of 2022.
With Russia & the Ukraine flaring up, Biden’s input could mean the markets may be in for a shift.
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