Daily Market Update 14/12/2022

Yesterday’s Overview

US inflation eases more than expected for the month of November:

–       CPI YoY falls to 7.1% from 7.7%

–       Core CPI YoY falls to 6% from 6.3%

As a result, markets ease the Fed’s terminal rate expectations from 5% to 4.85%.

The USD weakened initially with GBPUSD and EURUSD hitting new six-month highs, but sell-off in USD not sustained. Markets await today’s Fed meeting.

EU ZEW sentiment figures came in better than expected, keeping EUR supported throughout the day.

Today’s Overview

US inflation surprised to the downside yesterday, and whilst price action was hawkish initially with stocks higher and USD lower, the moves were not sustained. This is most likely because volumes in markets are lower than usual, on account of the festive period. UK inflation also came in lower than expected this morning:

  • CPI YoY falls to 10.7% from 11.1%
  • Core CPI YoY falls to 6.3% from 6.5%

GBP reaction has been muted, and markets expect the peak in UK interest rates to be at 4.5% by mid-2023. GBP moves will largely be dictated by risk-on moves in markets, and that is likely to be dictated by tonight’s Fed meeting.

A 0.50% rate hike by the Fed is priced in the markets, so we expect little reaction if the Fed follows through with this hike. More important to markets will be the Fed guidance on future rate hikes. In the last Fed meet, Chair Powell suggested that markets were underpricing the Fed’s terminal rate, and following the drop in inflation, it will be telling to see if Powell changes this statement. The Fed’s dot plot will also be in focus, which displays the Fed’s year-end interest rate projections.

A dovish statement from Fed Powell, following yesterday’s lower inflation print, then markets may well see this as the queue to keep selling USD, and buying risk going into year-end – i.e. seeing GBPUSD and EURUSD test new highs.

Equals Market Analysis– 14th December 2022

Today’s Market Rates

Today’s Interbank Rates at 09:13 am against sterling movement.

GBP>EUR – 1.1628

GBP>USD – 1.2379

EUR>USD – 1.0643

GBP>CAD – 1.6763

GBP>AUD – 1.8028

GBP>SEK – 12.636

GBP>AED – 4.5442

GBP>HKD – 9.6230

GBP>ZAR – 21.274

GBP>CHF – 1.1482

Today’s Highlights

·        USD      Fed Interest Rate Decision

·        USD      Fed Interest Rate Decision

·        USD      FOMC Economic Projections

·        USD      FOMC Press Conference

·        NZD      Gross Domestic Product (QoQ)(Q3)

·        NZD      Gross Domestic Product (YoY)(Q3)


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