Football might not be coming home for another four years, but the benefits shown in our domestic economy, have truly been brought home by the National Teams efforts in the World Cup. Thanks to the three lions, Andrew Bailey’s morning became a lot easier than anticipated. GDP m/m came out this morning (7am GMT) better than expected, showing growth at 0.1%, whilst forecasts expected a contraction of -0.2%. The growth was largely down to the boost in the food and drink sectors, which came with people out watching the football, hoping England could win their first World Cup since 1966. This figure would have been higher, were it not for the falls in the postal and travel services, which were severely impacted by the strikes that have become a recurring theme in British society over the last few months. There is a feeling that these figures are realistically doing little more the delaying the inevitable. Although the economy has grown slightly, without an event like the world cup, I would expect the next couple of months’ figures to show a contraction in the economy.

Following a relatively quiet first week of the year, investors eagerly anticipated yesterday’s US CPI data, with markets keen to decipher how far along the road the US are at bringing down inflation. More importantly, how they may act in their first interest decision of the year (1st February). Figures were released as forecast, with CPI y/y dropping to 6.5% from 7.1% the month before, so we expect the US to have hit its inflation peak. Following the results, the Fed has announced that they will be going for a 25bp hike, slowing down from the 50bp hikes that we have seen in the past. Off the back of this, we did see the USD lose traction against its biggest rivals, most notably, with the EUR/USD, which is now trading above 1.0850. The ECB will be hoping that they can see 1.10 again, following the next base rate decision in the US. This week also saw President Biden wrapped up in a classified document scandal, not too dissimilar to the one Former President Trump found himself in, and for which Biden was extremely critical of his predecessor. As Biden’s popularity has been declining anyway, with concerns over his health, this could mark the beginning of another period of extreme political instability in the US. The President will now have to appear in front of a specialist council, as they investigate the accusations made against him. Currency markets will be watching this closely, as instability could cause further USD weakness against its G7 rivals.

As we look to next week, the major talking points will be PPI/retail sales out in the US and CPI out in the UK (both coming out on Wednesday the 18th) Traders will analyse these results closely as they, once again, try to get any indications as to what central banks interest rate decisions are likely to be. With it now appearing that we have seen peak inflation in the US, it will become more and more important for the UK to continue to see high inflation, if they are to make serious gains on the USD next week. Therefore, CPI in the UK is really the stand-out news for the week ahead. Worth keeping an eye on will be the rising levels of the new Covid variant, dramatically named the “Kraken.” with it appearing to be more contagious and deadly than previous variants of Omicron. Although another lockdown seems highly unlikely and would be disastrous, it seems more possible that new rules on working from home and travel restrictions could be deployed, should hospitals feel the strain once again. This goes without saying, but it would seriously hinder many industries and deepen an already difficult economic landscape.