Weekly Market Report
The market has continued to digest last week’s interest rate decisions from the Federal Reserve, Bank of England and European Central Bank, with updated guidance driving volatility.
The US Dollar has found some support following a more cautious tone from the Federal Reserve, with expectations that interest rates will stay higher for longer. Geopolitical developments and elevated energy prices continue to contribute to uncertainty, supporting the Dollar.
UK bond yields have risen, but the Pound has weakened which could be a sign of investor concern. UK inflation figures and PMI data are all due this week which will be closely watched. The Euro has held it’s strength with some ECB members suggesting that interest rates could increase if inflation starts rising again.
Currency markets remain sensitive to incoming economic data with short-term volatility persisting as markets adjust to the latest central bank signals.
What this may mean for businesses
o Exchange rates may remain volatile in the short term
o Movements in exchange rates between agreeing a price with a supplier and actually making a payment can impact the overall cost
o Ongoing geopolitical developments especially updates around the Straight or Hormuz will be monitored closely.
o Energy prices could remain higher for longer and may keep increasing which would drive prices of goods and freight higher.
o Some businesses are looking at forward contracts to help provide greater clarity over upcoming international payments.