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  • richard evans

Waiting for Sue Gray report, FOMC rate announcement later this evening

Good morning

EU equities made back some earlier losses yesterday, while US and Asian markets are generally lower but not as negative as they had been earlier in the session. Still inflation, interest rates and geopolitical tensions are driving the markets.

We have both Fed and BoC with rate meetings today. FOMC are widely expected to keep policy unchanged this month although the statement will be watched closely for any major changes, particularly with respect to asset purchases and balance sheet reduction. Remember also there is a suggestion we could see a 50bps rise in March, so watch for any clues onthat as well. Meanwhile there is a decent chance we could see a rate rise from BoC with markets pricing in a 70% chance of a 25 bp rise. USDCAD currently 1.2585.

Uncertainty remains over Ukraine, I read one piece yesterday suggesting Russia were looking at mid-Feb before they take any action, and with negotiations so far leading nowhere, this could drag on for some time. France and Germany have said they believe a diplomatic solution can be found but I’m sure many believe it. Talk that Russia could cut off gas supplies to Europe is a worry. Worth remembering that Russia really does need the income but with prices already high I dread to think what impact this would have across Europe.

In the UK we may see the Sue Gray report into the possible lockdown breaches later today although timings are not clear. There is some thinking that it won’t be seen before PMQ. It will be interesting to see not only the results but also what Boris has to say about it, and whether he gains or loses any support from his cabinet and wider party. The Met police have started their own investigation into a number of events as well but this is not expected to delay the release of the Gray report.

GBPUSD currently trades at 1.3500, EURGBP at 0.8360 (GBPEUR 1.1960). Lets not forget we have the BoE rate announcement next week and I’ve seen a couple more banks now looking for a 25bps rise at that meeting. With Omicron so far proving to be less severe than feared, with restrictions being relaxed and with inflation flying high, BoE could well be forced into action.

Bitcoin has had a decent push higher after testing $33,000 earlier this week, now at $37,500 helped perhaps by comments from Russia saying cryptos should be regulated, not banned. I mentioned Bitcoin back on 5th Jan, it was $46,000 at the time and Goldmans had been talking about $100,000 as a price target. Since then it has done little other than come lower, this most recent uptick is the first decent move higher for three weeks. Still some way from Goldmans target, and still a long way from the Nov highs near $69,000.

That’s about all for today. Could prove to be a quiet session ahead of the FOMC so sit back and enjoy what could be a lively PMQ at midday.

- 13.30 US goods trade balance, wholesale inventories

- 15.00 US new home sales

- 15.00 BoC rate announcement

- 16.15 BoC press conference

- 19.00 FOMC rate announcement

- 19.30 FOMC press conference

- 21.45 NZ CPI

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