We are now 2 months into 2022, and it seems this year is going to be just as eventful as the last couple! We had plenty of announcements and data releases last week which managed to push Sterling exchange rates higher, with GBPEUR closing above 1.19 on the week and GBPUSD closing above 1.35.
The main theme last week was U.S CPI data which came in at 7.5%- which has shocked the market, with the Fed changing it’s stance from inflation just being “transitory” last year, to now being a real problem, all eyes are now on the Fed on as to when interest rates will start going up. Interestingly enough, from January, the CPI basket is now weighing less in food and energy, so I am expecting a natural drop in U.S CPI anyway due to this, but it seems a March hike is pretty much 100% priced in for the Fed.
So what is on our plate this week? The first thing to be watching is the situation between Russia & Ukraine, last week President Biden asked all Americans to leave Ukraine, which was a big development in the situation- unfortunately, wars and conflicts are an area which predictions are difficult and to be honest quite pointless, if you believe it is a large risk, then it is not worth holding out waiting for something to happen, and if you do not believe it carries risk, then you can act accordingly- it is a completely personal choice in these situations- my view is this, uncertainty is not good for the markets, it never has been and never will be, I am not a fan of having my finances depend on other humans and their decision making.
The second thing to watch is any announcements from the Fed, members such as Bullard have been very vocal over the last few days about rate hikes, and even suggesting an emergency rate hike- this will be worth keeping an eye on as it will directly affect the Dollar, Gold, and the stock market.
Lastly, as far as economic data is concerned, we have UK employment and earnings figures out on the 15th, which are now even more important following rising inflation in the UK and interest rates going up, if earnings are not going up in tandem with it, then this can potentially cause a problem down the road- so this is also worth keeping an eye on if you are trading Sterling. Speaking of inflation, we have UK inflation out on the 16th- which is expected at 4.3%- anything higher and we should see some market movement, and potentially more rate hikes priced in.
As ever, if you have any upcoming requirements please don’t hesitate to contact me directly.