Weekly Market Brief

The main event for this week was the Fed announcement. Jerome Powell took a more hawkish stance as he warned that the terminal rate would need to rise higher than previously expected. However, the Fed also said that they would take into account the impact of policy lags, the cumulative tightening impact, and ongoing economic developments. In the UK the Bank of England delivered its biggest rate hike in over 30 years as the UK fights double-digit inflation. However, it expects UK inflation to start falling early next year and the terminal rate to be lower than September’s meeting projected. The path of the GBP will now largely depend on the impact of the UK’s budget in mid-November.

Other key events from the past week

  • USD: Fed prepared to do more, Nov 02: The Federal Reserve hiked interest rates by 75bps and Powell told markets the Fed was expected to raise interest rates higher than previously expected.
  • GBP: BoE relief, Nov 03: The BoE delivered a 75bps hike, but now expects the terminal rate to be lower. The prospect of fiscal tightening from the UK budget on November 17 means the BoE has to do less. Will this keep the GBP pressured for November as the UK budget approaches?
  • FTSE100: Starting recovery, Nov 02: The FTSE 100 broke out of a daily head and shoulders pattern this week ahead of the BoE’s meeting. Is this now the time to buy battered UK stock?

Key events for the coming week

  • USD: Inflation focus, Nov 10: At 13:30 UK time the US headline inflation print will be released and is expected to fall from the prior reading of 8.2% y/y to 8.1%. However, the core reading is expected to rise to 6.7% y/y from 6.6%.
  • Strong seasonals approach for the FTSE 100: Can the FTSE100 make further gains on a new UK PM? See here for the latest seasonal insights on the FTSE 100 and reasons it may be a value buy right now.
  • USD: Consumer Confidence, Nov 11: The Federal Reserve will be keeping an eye on consumer confidence. A big drop in confidence will likely lift stocks on hopes of a potential slower path of Fed hikes ahead.

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