6 February 2023

ECB, Fed and BoE, new round of rate hikes

Last week was dominated by news on inflation in the Eurozone and the decisions of the world’s three major central banks. The ECB, FED and BoE decided for a further rise but at the same time sent encouraging messages about the future of price increases, albeit with much caution and the warning that the restrictive policy will last for some time yet. The financial markets initially ignored the central banks’ caution, then the US labour market data, positive beyond all expectations, cooled enthusiasm. Let’s take a look at some of the weekly trends in our analysis.

In the past week, 45% of the instruments and indices used for our analyses recorded a positive change. 54% experienced a negative variation. Analysing by macroclass, 48% of the equity instruments and indices recorded a positive weekly variation. 58% of bond instruments and 17% of the other asset classes used for our analysis.

Improving valuations in the past week accounted for 26% of the total. The previous week, valuations that had been adjusted upwards were 23% of the total.

Among the equity analyses, improving valuations accounted for 23% of the total.

In the bond analysis, 37.5% of the total were upgraded valuations. The ECB, FED and BoE decision first led the market to continue rallying, slowing down towards the end of the week on US labour market data.

Among analyses of other asset classes, improving valuations accounted for 47% of the total. Sentiment, commodity and currency analyses fell into this section. On the currency front, the market continued to give very interesting signals on the Yen, with the central bank coming under increasing pressure for its yield curve control.

Of the valuations, 29% are above average in the short term. 26% are above the long-term average of valuations. Last week they were 22% and 36% respectively.