IFX Market Report: Monday 7th November 2022

When Brexit was announced back in 2016, analysts predicted that the UK economy would collapse without the support of Europe. It is evident that the UK economy has terrible trade deficit amongst other things, but this deficit has been around since the 1980s. Wage increases driven by inflation have not been on par since the early 2000s, so had the UK economy been buoyant when the referendum was held, the vote may have been different. We may be a little worse off now due to Brexit but the pandemonium that Brexit would cause to the economy is not prevailing as initially thought. The warning from the ECB was that the UK ‘brexiting’ would be horrific for the UK, and with EU inflation higher than the UK, the ECB Brexit warning may have been a ‘suppress’ as they are worried about other Eurozone members flying solo too.

The UK is on a bit of a ‘rollercoaster’ journey at the moment with the recession predicted to last 8 consecutive quarters. When Liz Truss was in power and announced the mini-budget, the BOE forecast that the Interest rates would rise over 6% which would have a massive effect on households who have mortgages affected during this time. However new forecasts are for 4.75% as a peak which would make a 10% difference to a monthly mortgage payment on a £250,000 mortgage. The bank's economic forecasts also now predict that the depth of the recession is half of what initially thought and far less long in terms of time.

From a currency perspective volatility will remain as the markets watch each of the G10 economies battle their way out of their economic issues. This was evident on Friday as the pound pushed to 1.14, up around 2% compared to 1.1143 after the BOE interest rate decision.

US Midterm elections are about to start with former US President Donald Trump expected to announce his run for 2024 President imminently. With all 435 seats in the house, and 35 in the senate available, there are 48 hours for 39mil Americans to vote. Losing both chambers of congress would hamper Joe Bidens presidency.

GBPUSD currently resides at 1.13

GBPEUR currently resides at 1.1381

EURUSD currently resides at 0.9923