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  • richard evans

Markets shaken by potential for rate rises

Good morning

Not a great time for stocks, the likelihood of higher rates taking its toll on equity markets. US dollar is up, and crypto seems to be taking a bit of a hit, bitcoin trading down below $40,000 to its lowest level since August last year. Russia did mention it may ban use of and mining of cryptocurrencies which could be responsible for that move.

ECB minutes yesterday showed concern over inflation but pretty much equal determination to continue with monetary easing. Lagarde speaks today, we will watch closely for any comments on ECBs potential to act to counter inflation, we have but for now divergence between Fed, BoE and ECB is pretty clear.

UK retail sales disappointed this morning but this does not seem to have affected the market thinking that BoE will raise rates a further 25bps to 0.5% in Feb. GBPUSD hit 1.3660 yesterday but is currently almost 100 pips lower at 1.3570, while GBP also slipped from its highs against EUR, now 1.1970 having tested 1.2040 yesterday (EURGBP 0.8355 and 0.8305 respectively). Still don’t think the UK political situation is impacting GBP, but markets do not like uncertainty and it is far from certain as to whether Johnson can survive this particular storm.

USDCAD has traded down to mid-1.24s on higher oil pricing and rate rise thinking. It is off those lows, now 1.2530, but with rate rises possible from the BoC at next Wednesdays meeting, CAD should find some support and cap USDCAD gains.

US SecState Blinken is due to meet his Russian counterpart Sergey Lavrov in Geneva today to talk about the Ukraine crisis. This comes as US has given permission for US made weapons to be sent to Ukraine, I believe UK already have some defensive weaponry in place there. Biden upset Ukraine by saying a minor incursion isn’t too serious, obviously Ukraine feel any breach of their border is very serious indeed. Warnings from the West to Russia do still seem to be falling on deaf ears.

I have been reading this morning about a ‘personal drone’ called Jetson One that offers its buyers the ability to take off vertically and fly at speeds up to 60mp or so. Any faster and you’d need a pilots licence. It is pretty compact and at £75k or so relatively cheap, although flight times are hugely affected by the drivers weight so I’d probably be in the air for only 5 minutes or so. I won’t best one yet then! Not sure where it could be used, I wouldn’t expect to see many buzzing around any time soon.

So, onto the weekend. Assuming the ground thaws, we will be playing our long-awaited county cup match this weekend. I’ll report back Monday, can’t say I’m overly confident on this one given our opponents are supposed to be pretty much academy level. Still, we’ll give it a good go…..

- 12.30 ECBs Lagarde speaks

- 13.30 CAD retail sales, new house prices

- 15.00 EU consumer confidence

- 20.30 CFTC position data

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