Behind the curve

Today's news headlines: 

‘Fed Won’t Be Rushed in Its Hiking Path by Wall Street Frenzy’. Of the six Federal Reserve speakers this week, none have backed speculation of a half-point interest rate hike in March, with the most bullish, James Bullard, commenting that five hikes is ‘not too bad a bet’. These measured calls have come in stark contrast to Wall Street expectations of as many as seven hikes in 2022—with many interpreting Jerome Powell’s hawkish pivot as an admission that the Fed is behind the curve. It's also worth considering that shrinking the balance sheet will act as a method of tightening policy and may replace a couple of predicted hikes. (Bloomberg)

‘U.K. Retailers Raise Prices at Fastest Pace Since 2012, BRC Says’. The inflation story continues to gather pace as businesses sought to pass on rising food, fuel, and transportation costs to consumers in January. The British Retail Consortium report comes a day before the Bank of England is expected to raise interest rates and the group has warned that further price increases are due in the coming months. The effect of rising input costs being passed on to the general public will only compound the impending cost-of-living crisis, with most households placing living costs as their most pressing concern. (Bloomberg)


The view that the Fed won’t be rushed into hiking rates, along with a positive US earnings outlook, has supported stocks higher overnight, with the US Dollar selling off to the tune of 1% over the past 3 days. There’s room for the risk rally to cool over the coming days, with high-tier US data due out and central bank meetings in both the UK and EU.


UK British Retail Consortium Shop Price Index: 1.5% vs 0.8% previously
Spanish Unemployment Change: 17.2K vs -76.8K previously
US ADP Non-Farm Employment Change: 1:15PM
US Crude Oil Inventories: 3:30PM
Bank of Canada Governor Tiff Macklem speaks: 8:00PM

Interbank rates:

GBP/USD – 1.3538
GBP/EUR – 1.1995
EUR/USD – 1.1287
USD/CAD – 1.2683

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