IFX Market Report: Friday 28th October 2022

US GDP between July and September grew 2.6%, beating forecasts of 2.3%, and reversing the -0.6% of contraction in the previous quarter. Despite this, economists remain pessimistic about the economy as consumer spending is pretty much grinding to a halt, and the sharp interest rate rises to counter inflation push the economy towards recession.

The ECB increased interest rates for the third consecutive month yesterday when they announced a 0.75% hike, bringing the benchmark rate to 1.5%. This is the first time we have seen this level since 2009, and the ECB have reiterated that this is not the end of rate increases as they look to counter inflation. ECB president Lagarde acknowledged that inflation is way too high and will likely stay high for an extended period of time, and she also stated that the ECB will likely head into recession.

Despite the ECB rate hikes, President Lagarde’s comments saw the Euro fall slightly across the board, falling below parity again to around 0.9940 against the Dollar.

Data was limited in the UK yesterday as markets digest the news that the Government have pushed back the economic announcement to November 17th so that ‘the right decision’ can be made. So the pound moves were dictated by movements in other markets which saw strong US data move the pound back slightly to around 1.1550, but the pound strengthened slightly against the Euro briefly touching 1.16.

The International Monetary Fund (IMF) has downgraded its economic outlook for Asia as global monetary tightening, rising inflation blamed on the war in Ukraine, and China’s sharp slowdown dampen the region’s recovery prospects. The IMF cut Asia’s growth forecast to 4 percent this year and 4.3 percent next year, down 0.9 percent points and 0.8 points from April respectively. The slowdown follows a 6.5 percent expansion in 2021.

GBPUSD currently resides at 1.1520
GBPEUR currently resides at 1.1580
EURUSD currently resides at 0.9940

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