IFX Market Report: Wednesday 2nd November 2022

In one of the most important moments in economic history, the commonly used phrase ‘Quantitative Easing’ that we’ve heard many times since the economic crash in 2008 will now be reversed to ‘Quantitative tightening’. QE saw the BOE end up buying close to a Trillion pounds o Government debt, funded through the creation of new electronic money. QE did widen the gap between the rich and poor but ultimately prevented the recession from turning into a depression. Now the government will gradually sell off the £837bn debt that is left via Quantitative tightening (QT).

Analysts are forecasting that the US is likely heading towards a recession as recent weak housing data and calls for further large rate hikes are weighing on the US economy. Every time an adverse inflation report or negative data release comes through, it points toward the US FED doing more to counter the negative data which means a higher probability of recession.

Yesterday saw the pound lose some ground against the dollar losing around 1.2% when it hit 1.1450 and GBPEUR hovered around 1.16. The euro spent most of the day against the dollar just below 0.99.

This morning data in the UK showed that food prices in the UK surged 13.3% compared to this time last year, this was fueled by the ongoing energy crisis, the Ukraine war and a shortage of workers.

All eyes will be focused on the US interest rate decision as 6 pm to see whether they continue their sharp rate hike which is expected to be pushed a further 0.75 basis points.

GBPUSD currently resides at 1.1512

GBPEUR currently resides at 1.1630

EURUSD currently resides at 0.99