The market continues to process the recent actions of central banks and the predicted trajectory of interest rates in the near future. The consensus among analysts is that the Bank of England will increase rates by a modest 0.25% next month, although some believe that last week's split vote signals that we have already reached the peak.
As the emphasis shifts from inflation control to supporting the economy and avoiding a potential recession, the market predicts a 0.25% decrease in rates later this year. The latest UK growth data showed a contraction of 0.5% in December and no growth in the last quarter. The upcoming jobs data and inflation report, as well as the retail sales figures, will play a crucial role in shaping central bank policy.
The Federal Reserve is expected to continue raising rates, albeit at a slower pace, as they approach the peak. The Fed's decisions will have a significant impact on global asset markets, and their stance remains bullish. Meanwhile, the European Central Bank is taking a more aggressive approach to monetary policy, with a 0.50% increase predicted in March, which is boosting the Euro.
Volatility on the markets remains elevated, with investors lacking confidence in the face of uncertainty. The GBP/USD exchange rate has encountered resistance at 1.2500 and has support below 1.2000, ahead of the significant 1.1750 level. The GBP/EUR exchange rate has found stability, with key levels to watch ranging from 1.1000 to 1.1550.