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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
• April 12, 2023
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Tuesday was a busy day for global economic releases, below are some of the highlights and impact it had on the markets.

UK- BRC Retail Sales Monitor YOY (MARCH)- Forecast: 4.2%/ Actual 4.9%
Sales grew 0.7% ahead of expectation to 4.9%- largely due to Mother’s Day sales, despite the cost-of living-pressures and the wettest March in over 40 years, which dampened sales across fashion, gardening and DIY products. 
Barclays reported a 4% YoY increase in both credit and debit card purchases and the King’s Coronation next month should also see a boost in spending across retailers, pubs and restaurants
 
EURO AREA – Retails Sales YOY (FEB)- was forecasted to drop by -3.5% but actually fell by -3%
A MOM drop of 0.8% and 0.9% across the Euro Area and the EU, respectively.
The figures paint a picture of weakness in consumer demand and a broader economic slowdown, the effect of rampant inflation caused by rising energy and food prices.
 
USA- FED HARKER SPEECH– Whilst no exact indication was given to any forthcoming rate hikes, but Harker did say ‘In my view, we are not done yet….but we are close’.
It was suggested that there will be a hold on rates and let monetary policy do its work.
The goal is to slow down the economy….and core inflation to come in at around 3.5% this year, falling to 2.5% in 2024 and then back down to 2% in 2025.
The fed Reserve is committed to bringing down inflation and to maintaining the conditions for a healthy labour market.
 
Today we have some more key economic releases:
 
USA- Core Inflation Rate YOY (MARCH)- Forecast to rise by 0.1% to 5.6% and Inflation Rate YOY (MARCH) forecasted to drop by 0.8% to 5.2%
 
UK- BOE Governor Andrew Bailey Speech due out today at 2PM talking about ‘The shifting risk landscape’.
 
BoC Interest Rate Decision– Forecast to remain the same at 4.5%.
Some sections of the market are expecting 50 basis points cut by the end of the year, this was fuelled by last month’s banking issues across USA & Europe, despite Canada’s economy and labour market performing better than expected.
 
Last month BoC was the first major bank to issue a ‘conditional pause’ and all 33 economists polled said that rates will be paused at 4.5% –
23 of 32 economists said rates will remain unchanged for the rest of 2023 and 7 expect at least 25 basis points cut by the end of 2023.
 
In January, the economy was said to have grown 1.7% since the previous quarter, this was against a 0.3% expected contraction and the BoC’s growth projection of 0.5%. That said, inflation is still running twice the 2% target at 5.2%
 
Finally, the USA FOMC Minutes is expected to release at 7PM and should provide some insight on forthcoming rate hikes.
The Fed is hoping to take rates to 5.1% by the end of 2023, which implies at least 1 more 25 basis points hike before pausing.