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  • richard evans

GBP holds firm on rate rise expectations

Good morning

Market is certainly pricing in rate rises from US and further rises from UK with many thinking Fed in particular are falling behind the curve, with another sharp rise in inflation expected tomorrow. JP Morgan boss Dimon has said he’d be surprised if there are only four rate rises this year. GBP remains supported, this morning GBPUSD has traded above 1.36 and GBP has finally traded through the 1.20 level against EUR. Feds Powell speaks today but the text of his speech has already been released. Meanwhile his colleague Clarida is resigning due to some controversy over his personal trading. Clarida was due to leave at the end of this month anyway but an early departure seems sensible under the circumstances.

EURUSD is up to 1.1345 as I type. Lagarde speaks this morning, ECB has so far remained more dovish but it will be interesting to see whether they follow other central banks in turning more hawkish amid rising inflation. ECBs Lane has actually said he thinks inflation will fall this year and will be below 2% through 2023 and 2024,

Aussie retail sales were much higher than expected overnight, the trade balance was slightly lower than expectations but still pretty strong at AU$9.42m. AUDUSD currently 0.7180, GBPAUD tests the Sept 2021 highs around 1.8960.

US and Russia still far apart on what needs to be done to de-escalate the Ukraine crisis although Putin says he has no intention of invading Ukraine. Not quite sure why there are 100,000 Russian troops massing on the Ukraine border in that case. I’d tell Putin that he needs to take his troops away before talks can begin but I guess its not that easy.

Pfizer have reportedly got a vaccine to target Omicron which may be approved by March, although it must be said that if we can ride out this Omicron wave it may come just a little too late. In other vaccine news I have seen several reports recently suggesting the Chinese Sinovac shot is not particularly effective. Never sure whether this is western propaganda or whether it really doesn’t work well, but it may explain why China take such a hard zero policy line with Covid, I read they have shut down a second city on Omicron fears. I find it difficult to believe China won’t have already ‘obtained’ vaccine secrets from other countries.

While many people continue to face restrictions over Covid, the UK press is reporting yet another party at Downing Street which appears to break the Covid rules of the time. Back in May 2020 we were only allowed to meet one other person from another household outdoors. It would seem an invitation went out to 100 people and reports suggest Boris himself was there. I’m not one who demands resignations over every little indiscretion but it is difficult to see how Boris can survive in power for much longer.

- 10.00 ECBs Weidmann speaks

- 10.20 ECBs Lagarde speaks

- 15.00 Feds Powell speaks

- 23.50 Japan current account

- 01.30 China CPI

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