What’s Happening In The Markets This Week

Market Report - 06/02/23 - 10/02/23

Key Points: 

• GDP figures out in the U.K
• Retail sales figures out Monday in the Eurozone
• Michigan Consumer Sentiment out in the US 

GBP

Last week we saw a poor performance from the Pound, drops of 2% against the EUR and 2.5% against the USD, this is because we had positive economic data from both the Eurozone and US. The main point of last week was the BoE’s interest rate decision, which saw a rate hike of 0.5% from 3.5% to 4%. The BOE also announced this morning that they would continue to raise interest rates. This still wasn’t enough to boost the pound against its competitors. We were also told that our military is no longer a tier 1 fighting force, pressure has been put on Rishi Sunak to increase the investment into the nation’s armed forces. This week we have GDP figures coming out, this is very important as it is expected for the UK to show GDP growth for the first time since Sept 2021, this will also confirm the U.K fell into recession last quarter should the data be negative. If we do see the U.K showing some levels of growth then this could keep the pound from slipping further, but confirmation of a recession is likely to cause some downwards trends for GBP.

EUR

Last week we saw an ECB interest rate decision that was a 0.5% rise from 2.5% to 3%, this along with the HICP data that saw a drop in inflation levels, this all made for an overall strong week for the Euro. Lagarde was resolute in confirming that rates will rise further in March. Today we have retail sales being released for the Eurozone, should we see a growth in the sales figures then this could be seen as bullish for the EUR, but if we see a drop then this can be seen as negative for the Euro as this gives an indication of the consumer spending and confidence on the continent. We also have the HICP data being released in Germany this week, this can give us a good idea on how the eurozone’s inflation levels will take effect from the latest interest rate decision. 

USD

The Federal Reserve’s interest rate decision Wednesday saw the smallest rate hike we saw since the Fed started to raise interest rates to tackle the high levels of inflation in the US. The interest rate was increased by 0.25% from 4.5% to 4.75%. The biggest market mover last week for the USD was the Nonfarm payrolls figures released on Friday, this smashed the expected figures of 185,000 and came in at 517,000. This piece of data alone saw the Dollar strengthen over 1% against the EUR and over 1.25% against the Pound. This shows how robust the U.S Economy has been, where a lot of analysts thought it was almost impossible to continue high employment in times like these. This week we have the Michigan Consumer Sentiment being released, this generally shows a picture of whether or not consumers are willing to spend their money, so typically a high reading can be seen as positive for the USD, but should we see a low reading then this could be seen as bearish.