Key points & Recap:
• One more rate hike by the Fed and then pause
• GBPUSD and EURUSD attempts to make new highs
• Hunt confident in UK
US inflation fell more than expected to 5% year-on-year from 6% in the prior data point. However, the core inflation number which strips out food and energy prices rose to an expected 5.6% from 5.5%. What did this mean for markets? Ultimately, the data point added to markets pricing in further rate cuts by the Fed by year-end, with pricing going from 0.4% worth of rate cuts to 0.5% worth of rate cuts. As a result, GBPUSD and EURUSD led the charge higher back to recent highs.
The Fed minutes in the evening showed Fed officials shrugged off recession warnings to signal another rate hike in May, with market pricing still suggesting an 80% chance of a 0.25% rate hike in May.
Here in the UK, BoE Governor Bailey spoke yesterday suggesting that the MPC won’t let risks of financial stability divert them from fighting inflation. Also, we had Chancellor Jeremy Hunt suggest that we could see an election as early as Spring 2024 and rejected the IMF’s forecast to shrink by 0.3% this year.
The Bank of Canada did not hike as expected on interest rates, and there was nothing of note to suggest a hawkish change in its narrative.
UK data this morning was largely disappointing, with growth in February down to 0% from 0.3% growth in January, and industrial and manufacturing production falling shy of expectations and coming in at -0.2% and 0% respectively. Aside from against USD and JPY, GBP is marginally lower this morning.
Following on from yesterday’s inflation numbers of USD sellers are back in control, and should PPI figure this afternoon suggest producer inflation has eased as well, then we could well see GBPUSD and EURUSD create new highs.
The USD continues to slide after attempting to stage a recovery at the end of last week. Whilst core inflation remains relatively high, markets increased their bets for rate cuts by the end of the year from 0.4% worth of cuts to 0.5% worth of cuts. New highs could be seen on GBPUSD and EURUSD should PPI figures disappoint today.
Equals Market Analysis– 13th April 2023
Today’s Market Rates
Today’s Interbank Rates at 09:40 am against GBP movement.
GBP>EUR – 1.1359
GBP>USD – 1.2516
EUR>USD – 1.1020
GBP>CAD – 1.6772
GBP>AUD – 1.8597
GBP>SEK – 12.927
GBP>AED – 4.5955
GBP>HKD – 9.8260
GBP>ZAR – 22.852
GBP>CHF – 1.1152
· 13:00 CAD BoC’s Governor Macklem speech
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