Financial markets improve as recent huge sell-off likely 'overcooked'..
|
| Investors seem to be in a 'better mood' today as financial markets recover and the US Dollar sinks across the board. It remains to be seen whether the mass road to recovery starts here or whether this is just a standard pullback following an intense 48-hours.
After nearly a 100% rise in gas prices for the UK & EU on Monday/Tuesday (yes really), today we see a 9% drop. But, oil has continued to rise and many are anticipating to see $100 a barrel in due course (currently $85) which will keep the USD strong.
We believe helping investor sentiment today is the Iranian estimated ballistic missile data that was released this morning. It shows around 350 missiles were launched on day one, 175 on day two, 120 on day three and 50 on day four. If Iran's missile attack is being neutralized, the war will end quicker and naturally there will be less panic everywhere.
The change of pricing in the chances of a Bank of England interest rate cut this month has aided GBP v EUR.
The 'interest rate premium' we have been covering of late (the divergence gap closing between the EU & UK's interest rate) is helping the Pound, as the longer and higher the UK's interest rate is compared to the EU's helps the Pound (inflow of foreign investment).
There is no guarantee the BoE will not cut rates in 2-weeks time just because money markets have changed their tune (20% from 80% chance). Renewed inflation fears are real and so is the 'wait-and-see' attitude of the MPC, BUT, everything else considered it still makes sense to cut them, so this surprising 0.8% jump in £-€ this week could be wiped in 2-weeks' time.
Over to the low-key Spring Statement now and Chancellor Reeves delivered mostly positive news to parliament. The main issue with the OBR data is it was finalized in the middle of January and the goings on this week potentially changes everything.
Still, the main headlines were;
- Reeves will deliver 'three major choices that will determine the course of the economy into the future' in 2-weeks' time.
- Inflation is falling faster than expected and is due to hit target by year-end
- Unemployment is expected to peak at 5.3% this year
- But, economic growth is expected to be lower this year compared to last at 1.1%
A better day for Sterling today then, but this story is far from over yet. |
|