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GBP in freefall as BoE raise rates but warn of possible recession

Good morning

Obviously the main news is the sharp sell-off in GBP following yesterdays rate rise by the Bank of England. There had been talk of a dovish hike, I have to confess I have never really agreed with the term, but if there ever was such a thing, we saw it yesterday. The warning of high inflation was bad enough, but a mention of the economy contracting was pretty much enough to send GBP into freefall. There were some votes for a 50bps rise but even that wasn;t enough to stop the rot.

GBPUSD, which had been up above 1.2600 in the early hours of yesterday, had dropped to 1.2325 by the evening, a minor attempt at a recovery saw it creep up to a heady 1.2370 or so, but this morning renewed selling has taken it to 1.2280. 1.2300 as I type, next big level everyone is talking about is 1.2000. USD buyers have limited choices. 1. Do nothing and hope levels improve. 2. Sell GBPUSD forwards. 3. Look at one of our structures that gives downside protection but with a chance to improve if we see a GBPUSD recovery.

Local election results are coming in, conservatives have lost some key seats although perhaps overall haven’t done quite as badly as it was thought they may earlier in the week. BoEs Mann, Pill and Tenreyro speak today, could get an idea of BOE thinking.

Global risk sentiment is well and truly shaken with heavy losses in US equities yesterday and most Asian markets followed suit overnight. USCNY fixed much higher than yesterday at 6.6332, while USDHKD remains within its peg although really at the very top of the range. China reiterate their zero covid stance, as numbers of fatalities from Covid reaches 15,000,000, or one in every five hundred people.

Meanwhile US nonfarm payroll numbers are out this afternoon, expecting headline around +400k but even a weak reading won’t change the idea that Fed will continue with their rate rise cycle, so surely unlikely to lead to any significant USD sell-off.

Three matches for my U15s this weekend, one this evening and yet another double header on Sunday. A potential nine points on offer which would do wonders for our league chances but I’m not counting my chickens just yet.

Weather looks good for now, have a great weekend if we don’t speak before.

- 10.15 BoEs Mann speaks

- 12.15 BoEs Pill speaks

- 13.30 US nonfarm payrolls

- 13.30 CAD unemployment

- 14.15 Feds Williams speaks

- 15.00 CAD Ivey PMI

- 16.00 BoEs Tenreyro speaks

- 20.30 CFTC position data

- Monday

- 00.50 BoJ minutes

- 03.00 China trade balance

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