IFX Market Report: Friday 25th November 2022

Sir Dave Ramsden, BoE deputy governor, says that while he expects that interest rates will need to rise higher, there are “considerable uncertainties" about the economic outlook. He commented during in his statement ‘Although my bias is towards further tightening, if the economy develops differently to my expectation and persistence in inflation stops being a concern, then I would consider the case for reducing Bank Rate, as appropriate’.

UK PM Rishi Sunak rejected claims the government was planning a Swiss-style deal with Brussels that would mean falling into line with the bloc’s laws. Mr Sunak, a Brexiteer, told business leaders at the CBI conference he wanted to be “unequivocal” that he will “not pursue” any relationship with Europe that “relies on alignment” with its rules and regulations.

The dollar has weakened over the past week, mainly down to better than expected inflation figures which have in turn given the FED less need to hike interest rates as much as previously thought. But added to this some of the Fundamental data has been weak, such as manufacturing PMI which was expected to remain at a neutral 50 but came in at a retracted 47.6. Services PMI also came in worse than expected.

Risk sentiment has also picked up as investors are more optimistic about China’s ability to deal with recent Covid cases, and their readiness for further stimulus in the economy. GBPUSD rose to 1.2150, its highest level since mid august, whilst EURUSD pushed above 1.04 the highest since the beginning of July.

German Q3 figures surprised the market this morning after they posted a 0.4% growth figure. The preliminary figure of 0.3% released a few weeks back was still better than expected, so the final figure was even more positive.

GBPUSD currently resides at 1.2080

GBPEUR currently resides at 1.1629

EURUSD resides at 1.0383