Market Update
- April 23, 2021
UK
Consumer confidence for the UK has reached its peak since Covid-19 restriction have been put in place. Following suit, consumer spending has now breached pre-pandemic levels. Will this economy continue to rebound? Retail footfall, namely public transport, pubs, restaurants have recovered over the past couple of weeks which could continue to recover further as government guidelines surrounding restrictions are eased.
Manufacturers within the UK have also experience and uptick in optimism – order for new work and investment plans are rising for most to take advantage of tax break announced by Rishi Sunak. Factories are now suggesting they will be seeking to grow workforces which could aid the Pound as more jobs are created.
EUR
The European Central Bank has kept its monetary policy and interest rates unchanged. President Lagarde of the ECB will look to maintain this stance as Covid-19 recovery and uncertainties surrounding the pandemic still linger. Concerns are growing as borrowing costs are on the up for European Governments before the economy makes a full recovery from the pandemic. The ECB expect purchases under the Pandemic Emergency Purchase Programme (PEPP) to shift in the upwards direction in comparison to the beginning of the year. Lagarde also mentioned that economic activity may have contracted once again following 3 months of contraction of 2021.
Focus will now shift to the next ECB meeting in June as ECB members are looking for vaccination rates to rise and economies to start opening up. This will be subject to how the pandemic continues.
USD
President Joe Biden is on track to raise taxes on capital gains – almost doubling the rate for high earners. This has caused US Stocks to have their worst performing day for a number of months and also boosted demand for the US dollar as a safe haven. Inflation for the US has improved closer to the target of 2%. Although investor may not want to see big jumps towards this causing hyper-inflation; inflation will be monitored closely with potential for rate hikes also on the agenda.