Recession Unlikely as Market Fears Looms


GBP/USD is currently trading at about 1.4507, GBP/EUR is trading at about 1.2850 as the #market opens up this Friday morning, so Sterling is a little bit higher against the U.S. Dollar and also a little bit higher against the Euro and after the nadirs that it saw yesterday – fresh cut (13-month lows in GBP/EUR).

We saw interest rate expectations further kicked out along the curve after a very volatile day in markets yesterday. Some interest rate markets pricing in a full 25 basis point cut by the Bank of England within the next 12-months. We also saw for instance the #Federal Reserve see no interest rate cuts through 2016 and through 2017, but those have repaired themselves a little bit, but even so markets are quite volatile – certainly were volatile yesterday.

Furthermore, markets have calmed a little bit this morning, and you’ll have to believe that if we continue to see these calming through the next couple of weeks, certainly the impact the #stock market moves have had on the real economy would be quite slight, though no economic indicators out there are really pointing towards a recession at the moment, it is purely #financial market getting a little bit of the tizzy at the moment.

Going forward, we’re likely to see the desire for have trades slack it off a little bit and when we at #CSFX say that we mean demand for the #Euro, the Japanese #Yen and demand for government bonds and therefore things like equities and hopefully Sterling should repair themselves from here.

Obviously, there’s a lot of ifs within the sentence above, but if you like us at #Capital Street Research Desk believe that the movements that we’ve seen are purely down to banking shares and not due to the #economic fundamentals in the world economy, then that’s where we should be looking for gains sooner rather than later.

Data wise today, thing are going to be fairly quiet, but we may see quite a volatile afternoon session as people expect obviously #China to come back into markets on Sunday night, following the Lunar New year Holiday, but also it is President’s Day in the United States on Monday and therefore a lack of #liquidity there as well.

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