Gradual recovery

Equity markets are edging higher again today, a sign of gradually improving confidence following a relatively drama-free weekend.

As we saw on Friday though, anxiety remains high and things quickly spiral in those circumstances so investors are likely to remain vigilant. The dust is still settling but every passing day rebuilds confidence and allows investors to feel a little bit more relaxed. Policymakers are continuing to do their bit as well and this morning we’ve heard from some at the BoE, while ECB President Christine Lagarde is due to speak later.

BoE relaxed despite inflation spike and bank worries

Inflationary pressures are still intense in the UK but the central bank is refusing to get carried away with the data. Rather than talk up the need for further rate hikes, Governor Bailey has remained open-minded on future moves, insisting that the bank will hike if the data warrants such a response.

Time will tell whether that approach is appropriate, considering inflation last month leapt to 10.4%, while data from BRC this morning showed shop prices have risen by 8.9%, a large contributor to which came from food which jumped by 15%.

The BoE continues to believe, alongside others, that inflation will fall sharply over the course of the year which explains the caution on interest rates. But until that starts to filter through into the data and we see those rapid declines unfold, investors and the public, in general, may be a little nervous. It wouldn’t be the first time their forecasts have been too optimistic.

Bitcoin’s remarkable resilience

Bitcoin is displaying such unbelievable resilience to what is happening around it, even in the crypto industry, that you have to wonder just how sustainable that can be. While Bitcoin did fall a few percent in response to reports that the CFTC is suing Binance, the industry’s biggest exchange, the drop doesn’t feel particularly significant.

Especially in light of the gains we’ve seen in recent weeks and this year as a whole. Of course, that isn’t to say it’s suddenly going to plunge but it will no doubt be interesting to see how it performs over the coming weeks, especially if further turbulence is coming for the industry.

For a look at all of today’s economic events, check out our economic calendar:

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam