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Market Update

• Posted by currencies in Bank of England, Currency, Dollar, Economy, EUR, Fed, GBP, Inflation, Rate Cuts, Sterling, UK, Uncategorised
• February 15, 2023
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Yesterday we saw UK Employment data release above expectation, which saw GBP climb above both Dollar & Euro. 34K more jobs above forecast and unemployment remained unmoved at 3.7%.

Average earnings however dropped by 0.3% below forecast to 5.9%.

Today we had UK Core inflation data released this morning, which come out 0.4% better than forecast at 5.8%  and the Inflation Rate YoY (JAN) has also come out 0.2% better but still in double digits (10.1%).

However inflation still being in double digits shows the rate  is still and way off targets, meaning BoE may change their stance of further rate hikes. Also UK bills could now rise again further in the next few weeks.

In Europe, GDP Growth Rate QoQ released on forecast at 0.1%, which was a 0.2% drop from previous and GDP Growth Rate YoY also remained unchanged at 1.9%, a drop of 0.4% from previous

Growth across Europe is contracted.

In America  the Core Inflation Rate YoY is up by 0.1% to 5.6% but 0.2% less than previous

Inflation Rate YoY is also up by 0.2% to 6.4%.

MoM Core Inflation & Inflation remains unchanged at 0.4% and 0.5%, respectively

whilst Inflation is still well above the 2% target rate the Fed Reserve will look to make 1 or 2 further rate hikes but could potentially halt raising rates later this year. Based on recent data there is strong possibility of 25 basis points in the next meeting.

Unlike the USA where Inflation is now below 6.5%, the BoE will need to do more to bring inflation down. Earlier this month we saw BoE implement a 50 bps hike (to 4%), the highest in 14 years; The market is predicting further rate hikes to 4.4% by the Summer, which implies no more than a single 50 bps hike or couple of 25 bps hikes. 

The only other significant data today is USA Retail Sales MoM (Jan) which is forecast at 1.8%, which would be a 1.9% increase from previous.  This would imply that consumer confidence is still relatively high in the USA, so any further rate hikes could be absorbed by the taxpayer.