IFX Market Report: Thursday 16th June 2022

The Federal Reserve of the US announced yesterday a much stronger increase of interest rates than forecasted. The Bank of England is set to announce an interest rates hike to 1.25% today while the Swiss National Bank increased its interest rates for the first time in 15 years.

Yesterday, the Federal Reserve raised its benchmark interest rates by 75 basis points to 1.75%, its most aggressive increase since 1994. The decision comes as record-high inflation affects the economy and the stock market worldwide with inflation going at its fastest pace since December 1981. The FOMC committee expects the rates to reach 3.4% by the end of the year as expectations for economic growth have been significantly cut from 2.8% in March to 1.7% now.

The Bank England is also set to announce an interest rate hike today at 12pm BST, with the UK inflation soaring at 40-year high of almost 9% annually in April as food and energy prices explode. The BoE already increased its based rate by 25 basis points in May to 1% and is expected to increase it by another 25 basis points today to 1.25%. The Bank expects inflation to reach 10% by the end of the year, showing concerns for economic recession which has already shown signs of happening with -0.3% decrease of the GDP in April.

This morning, the Swiss National Bank took similar measures and increased interest rates for the first time in 15 years. The SNB announced that interest rates would be increased by 50 basis points from -0.75% to -0.25% in order to prevent inflation from spiralling out of control. The SNB will continue to monitor the value of the CHF, and was prepared to intervene in foreign exchange markets to keep control of the currency and protect its status as a safe-haven currency.

Cable saw the US Dollar lose its momentum yesterday with the FED interest rate increase. GBPUSD opened at 1.2119 and close slightly under 1.2174.

EURUSD also followed a similar trend with the pair opened at 1.0404 and closed at 1.0449.

GBPEUR saw big movements with the British Pound gaining back the previous day’s losses after poor economic results in the EU with slow industrial production increase and higher than expected CPI in France, as the pair opened at 1.1472 and closed to 1.1615.

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