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Market Report 09-05-2022

Published: 09/05/2022 By ECAP

Last week was a case of one to forget in regards to Sterling, the pound continued to lose ground against the greenback as pressure mounted following the recent MPC meeting. We saw the Bank of England raise interest rates within the UK by 0.25% to a total of 1.00%, however it was the rhetoric that followed that really hurt the pound. Comments were made of a potential risk of stagflation with the UK's economy and forecasts of raising inflation in a recessionary economy later this year. Its the downbeat comments that managed to help the greenback push rates back below the 1.23 levels, eyes will now be focusing on the macroeconomic data from the nation, most notably the GDP figures due this week.

The Federal Reserve meeting on Wednesday provided some very short-lived relief to markets when Chair Powell appeared to take 75 basis point hikes off the table for now. However, risk assets and US Treasuries reversed course quickly and resumed their sharp sell-off the following day, and tech stocks and speculative favourites generally got pummelled for the rest of the week. The payrolls report on Friday sent the same message of the last few months: the US is at or beyond full employment, no further help will come from expanding the labour force, and wages continue to lag prices. The latest one could be a silver lining of sorts for the Fed and, should we see any signs that price pressures are peaking in Wednesday's CPI report, as markets expect, Treasury markets could see some relief, and the relentless dollar rally could falter.