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The week ahead


Sterling has found some support in the past two weeks, making a sojourn from its December 9th lows, but has come off overnight in spectacular fashion. The Bank of England’s Monetary Policy Committee voted to raise rates from 0.10% to 0.25% last week. This is perhaps the prelude to a wind-down of its quantitative easing asset holdings, but the rise is likely to hit growth as well. It’s a finely balanced point in the UK where core inflation—representing demand-driven price growth—has started ticking up towards uncomfortable levels, juxtaposed with producer cost increases which have been passed on almost entirely to consumers. There’s one thing that’s a near certainty: asset price inflation is in policymakers sights.

  • The Confederation of British Industry’s Industrial Order Expectations figure came in at 24 today following last month’s upside surprise reading of 26.
  • Public Sector Net Borrowing is expected to show another decrease tomorrow, coinciding with a lapse of government support and the Bank of England interest rate hike.
  • CBI Realised Sales data also comes out tomorrow and is expected to present a decline. Omicron proliferation predates this measure, but last month there were already inklings of Christmas restrictions, so it isn’t too surprising.



In the European Union, the poor showing by the common currency is hard to ascribe with great certainty. On the one hand, Purchasing Manager Index data is showing continuous improvement, but measures of consumer spending and business confidence have been declining since a Q2 2021 high. On the other hand, the European Central Bank is also largely constrained in its actions—which it must keep accommodative—ranking far behind the UK and the US which have raised rates or signalled intentions of doing so, respectively. During the winter, the political dispute with Russia over a potential invasion of Ukraine has cast doubt over an easing of natural gas prices as 30% of EU natural gas comes from Russian fields. 

  • The only noteworthy piece of data for the Euro this week is the Consumer Confidence release which is likely to show a continued downward trend. Expectations are for the worst reading since April 2021.



The latest setback of the Build Back Better deal in the US and more hawkish tilt of the Federal Reserve Board of Governors has reined in inflation expectations and perhaps dampened growth as well. Oil continues to trend lower, although we expect OPEC+ to dynamically adjust supply to keep it within a stable range, so this is perhaps the bottom end of where we might find ourselves in 2022. The trade-weighted US Dollar has consequently been surging towards November highs.

  • CB Consumer Confidence comes out on Wednesday and will be a key input for the Federal Reserve since consumer spending is crucial to future Consumer Price Index data.
  • On Thursday, the Core Personal Consumption Expenditures Price Index m/m is expected to show a sustained uplift in inflation; it's worth keeping in mind this monthly reading is very noisy data and doesn’t necessarily represent the underlying trend.
  • Also on Thursday, Core Durable Goods Orders m/m data should show a stable growth trend, reflecting positive consumer sentiment and spending.


If you'd like to discuss your foreign exchange requirements with one of our currency specialists, call us on +44 (0)20 3465 8200.