Key Points:
• Inflation doesn’t seem to be going anywhere
• GBP climbs as markets see peak rates at 5.50%
• FOMC minutes to reveal hawkish tones?
Recap:
PMI numbers from the EU, UK, and the US yesterday all followed a similar trend where there seems to be a divergence between the activity in the manufacturing sector and the service sector. The big takeaway from the data was that for services, demand remains strong and thus will be concerning for the ECB, BoE, and the Fed, therefore keeping up the pressure for more hikes.
US treasury yields continued to climb yesterday, adding support for USD.
UK inflation continues to be sticky with this morning’s numbers all coming in higher than expected. Year-on-year prices dropped to 8.7% versus 8.2%, month-on-month came in higher at 1.2% vs 0.7% and core CPI came in higher at 6.8% vs. 6.2%.
What does this mean for markets? Well, the BoE has more to do, and markets have now added an additional 0.4% worth of rate hikes by year-end which could see peak interest rates rise to as high as 5.5%. GBP is on the up this morning as a result.
Markets
This morning’s UK inflation numbers came in higher than most economists were expecting, and the surprise factor is keeping GBP on the up early doors on higher rate expectations. GBPEUR has made a new five-month high as a result, and buyers of EUR who wish to take a risk could look to target the highs we saw on the 1st December, which is roughly 1.3% higher than current levels. Most GBP pairs are trading near recent highs, and looking at the GBP index we stay near 1-year highs. Governor Bailey will be speaking twice today, and no doubt will be questioned on today’s numbers.
For the rest of the day we have German IFO surveys, and in this evenings minutes from the latest FOMC meeting we’ll be looking out for any hawkish notes to back the continued easing in the markets of Fed rate cuts.
Equals Market Analysis– 24th May 2023
Today’s Market Rates
Today’s Interbank Rates at 09:36 am against GBP movement.
GBP>EUR – 1.1528
GBP>USD – 1.2428
EUR>USD – 1.0781
GBP>CAD – 1.6831
GBP>AUD – 1.8892
GBP>SEK – 13.253
GBP>AED – 4.5617
GBP>HKD – 9.7320
GBP>ZAR – 23.855
GBP>CHF – 1.1200
Today’s Speeches
• GBP – BoE Bailey
• EUR – ECB Lagarde
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