US stock futures indicate a lower as investors continue to asses economic crisis and the Fed’s stance. The Bank of England will announce its policy rate while all eyes will be on the inflation data. Bitcoin got another life as Black Rock shows confidence and files its Bitcoin ETF. Here is more on weeh ahead.
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UK Households On the Ropes, GBP strong on hawkish BoE
With the Bank of England continuing its hiking cycle and GBP’s recent strong performance, this week the key market event to follow for cable would be the UK CPI coming in on Wednesday.
The hawkish stance of the Central Bank has sent mortgage rates at rates similar to the crisis from Kwarteng, Truss times. This creates further difficulties for most UK households as a big amount of fixed term mortgages expire this year and the new rates which borrowers are being offered could see their payments increase significantly. There could be further pressure on the UK housing market going forward.
Our view is that it is likely for UK inflation to remain elevated above the 8% level for a while, as the high inflation in the UK is a result of the unique post Brexit circumstances of the economy.
Lower energy prices have helped CPI to become lower in EU and US, but the effect will probably not be as quick for the UK economy.
On Thursday we have the BoE interest rate decision with a rate increase of 0.25% to take the current rate to 4.75%.
We can see more opinions from the BoE at this event, but it’s likely that they will mostly be hawkish. Thus, our view is that we will see continued GBP strength in the coming weeks.
Sterling Price Chart
US Stocks continue to shine
Following the recent strong rally in US Stocks which was led mainly by the tech sector and the Fed pause of interest rate hikes, this week isn’t very intense in terms of key economic data for the US.
US stock futures now
Preliminary Services and Manufacturing PMI data on Friday can give us an indication of where inflation would be headed.
Thus, our view for the week ahead is that we are likely to see continued move to the upside for risk assets. This is likely to continue until we see a strong demand for US 10 year, which we think won’t materialize until inflation becomes lower than the 10-year yield.
Cryptocurrencies: BlackRock is in the game
Following a big crackdown on cryptocurrency exchanges we saw some selloff in the market. However, that was being mixed with news of BlackRock applying for a US spot Bitcoin ETF which is bullish for the market.
So far, such ETF still hasn’t had success with approval, but given the influence of BlackRock, we believe that this might change.
With BTC halving also happening sometime next year, we are likely to start seeing demand for crypto assets increase.
All of that being said the months leading up to 2024 will most likely not be very exciting for crypto traders.
