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On January 8th, European Central Bank Vice President Guindos stated that interest rates are currently at an appropriate level, but warned of "significant uncertainty" brought about by geopolitical events. The policymaker said, "Some of whats happening now was unimaginable just a few quarters ago." Guindos stated, "Business investment could be affected in a complex geopolitical environment, but its currently evolving in a very mild manner." He added, "Despite some improvement in real income, households are keeping savings rates high due to concerns about the future and even fiscal policy." However, he indicated that the "complex geopolitical environment," including concerns about the conflict in Ukraine, has not yet had a substantial impact on the eurozone economy. "Current interest rates are appropriate; the latest data are entirely in line with our forecasts," Guindos said, "overall inflation is at 2%," and "the services inflation we were previously concerned about is slowing."Russia claims that the military declarations of the pro-Ukrainian "Volunteer Union" are becoming increasingly dangerous.On January 8th, Morningstar, in its Q1 2026 outlook report, stated that Asian equities are expected to continue their upward trend in 2026, supported by reasonable valuations. Analysts indicated that while occasional pullbacks are possible, a sustained correction appears unlikely. Global spending on artificial intelligence remains a core driver of technology sector earnings, and valuations for AI-benefiting stocks generally remain attractive. Morningstar anticipates the Federal Reserve will lower the federal funds rate, leading to lower interest rates in Asia, excluding Japan. Japan, on the other hand, may see a gradual increase in interest rates. The report added that geopolitical tensions remain a major risk, and intermittent market volatility is possible.A spokesperson for the Russian Foreign Ministry stated that Western troops and military facilities stationed in Ukraine will be considered legitimate operational targets.A spokesperson for the Russian Foreign Ministry stated that the deployment of Western troops and military facilities in Ukraine would be considered an act of intervention that threatens security.

After a Strong Rise Supported by the BOE's Dovish Guidance, EUR/GBP Floats Above 0.8700

Alina Haynes

Dec 16, 2022 11:57

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Following Thursday's trading above the important resistance level of 0.8700, the EUR/GBP pair is exhibiting range-bound behavior during the Tokyo session. After the Bank of England (BOE) sounded dovish on policy advice and the European Central Bank (ECB) announced a hawkish forecast for interest rates, market participants engaged in aggressive cross buying.

 

As expected, BOE Governor Andrew Bailey increased interest rates by 50 basis points (bps) to 3.25 percent. The inflation rate in the United Kingdom is in double digits, and the struggle against persistent inflation will continue for an extended period; hence, policy tightening is essential.

 

As direction for future monetary policy actions, the BOE noted that "the majority of the Monetary Policy Committee (MPC) feels that more bank rate increases may be necessary." The British pound has been subjected to great pressure due to the lack of clarity surrounding future policy tightening. Voting on the interest rate decision, policymakers supported the status quo because they regarded the current interest rate policy to be adequate for fighting inflation.

 

As predicted, ECB President Christine Lagarde raised interest rates by 50 basis points in relation to the Eurozone. Due mostly to rising food prices, the Eurozone's central bank expects inflation to remain well above its 2% target for a lengthy period of time. The ECB has upped its interest rate peak forecast because it anticipates two additional 50 basis point rate hikes.

 

The release of Retail Sales statistics for the United Kingdom will be significant for future forecasting. According to the forecasts, the yearly economic statistics (Nov) would likely decline by 5.6% compared to the previously reported 6.1% decrease. While the monthly data will decline from 0.6% to 0.3%, they were 0.6% in the previous report.


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