Daily Market Report - 15/06/2022
Sterling collapses to multi year lows
The Pound has plummeted to multi year lows against the Euro and the US Dollar this morning, as investors continue to lose confidence in the UK economy and the BOE’s ability to manage inflation, which is spiralling out of control. The collapse has been sizable, with GBPEUR dropping 1.20% yesterday reaching 1.1474, the lowest level we have seen since April last year. Meanwhile GBPUSD dropped 1.10% to 1.1933, the lowest level seen since March 2020.
Today, the markets are on tenterhooks - the US Dollar hit a 20 year peak ahead of the Fed's interest rate decision later today, whilst investors wait to see how aggressive the US central bank will be in raising rates. The are multiple reports suggesting that a hike may be as big as 0.75 % points (rather than the a 0.50 % hike) to help tackle the issue of soaring inflation. If the Fed follow through with a 0.75% hike, it will be the biggest increase since 1994.
Bearing in mind the European Central Bank is also getting a firmer grip on their monetary policy this week, coupled with the impending Fed hike; there is the possibility of more Sterling weakness moving into the latter part of the week.
The European central bank are also due to hold and emergency meeting this morning, to discuss the recent sell off in government bond markets. Bond yields have risen sharply since the ECB promised a series of rate rises last Thursday and the spread between the yields of German bonds and those of more indebted southern nations, particularly Italy, soared to the highest in more than two years.