ECB raises rates to highest level in over a decade, US GDP bounces back in third quarter, Bank of Japan keeps ultra-low interest rates.
October 28, 2022
GBP/USD 1.1517 GBP/EUR 1.1581 EUR/USD 0.9945 USD/CAD 1.3609 EUR/CHF 0.9898 EUR/SEK 10.9559 EUR/NOK 10.2715 EUR/DKK 7.4421 USD/ILS 3.5469 AUD/USD 0.6412 NZD/USD 0.5799 USD/SGD 1.4135 USD/JPY 147.44 USD/CNH 7.2813 USD/INR 82.4625 EUR/ILS 3.5274 GBP/ILS 4.0848 USD/ZAR 18.1074
Rishi Sunak and Jeremey Hunt are exploring tax hikes and spending cuts worth up to £50 billion a year to restore public finances. This could amount to the equivalent level of budgetary tightening as George Osbourne’s austerity packages.
Expectations over the Bank of England’s November meeting have whipsawed over the past month as markets attempted to gauge how the MPC would react to the market turmoil. With a new PM, in downing street the risk Premium on UK assets is fading. Expectations reached as high as 2% during the middle of the bond market meltdown, however currently markets are split over whether the BoE will deliver a 0.5% or 0.75% hikeEUR
The European Central Bank raised interest rates by 0.75% yesterday, bringing rates to their highest level in more than a decade. The governing council signalled that it is making progress in taming inflation.
The Euro slipped over 1% against the dollar through yesterday as the ECB tweaked its policy guidance with some Governing council members hinting that 0.75% is no longer the expectation for December’s meeting. The tone of the first statement hinted that the end of tightening might be in sight which only added to the monetary policy divergence between the ECB and the Fed.USD
US 3Q GDP rebounded yesterday with economic growth returning at 2.6%. This has served to obscure signs of a slowdown seen across the board in labour markets and PMIs. The Fed is likely to view its weaker economic components as intended consequences and is unlikely to sway the Fed off its tightening cycle just yet.
Meanwhile, US jobless claims remain near historical lows with companies hesitant to lay off workers. Higher interest rates and a cooling economy could force businesses to recalibrate demand. Some models predict that only 35,000 jobs need to be created each month to hold the labour market steady.ASIA/PACIFIC
The Bank of Japan opted to stand by its ultra-low interest rates amid fresh government support. The BOJ pushed back against market speculation that it might adjust policy. The Yen was broadly unchanged, however slipped slightly following Kuroda’s comments not to expect a policy exit anytime soon.ILS
USDILS trades 0.9% higher intraday returning above 3.54. Polling shows that the Yesh Atid party could be on course for a record number of seats, with the opposition bloc led by Netanyahu falling short of the 61 seats required for a majority.Data & Events
Italy Oct. CPI
Germany Oct. CPI
Eurozone Oct. Consumer Confidence.
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