Inflation expected to decline ahead of today’s US CPI print, Italian debt-to-GDP ratio seen falling
January 12, 2023
GBP/USD 1.2173 GBP/EUR 1.1306 EUR/USD 1.0767 USD/CAD 1.3424 EUR/CHF 1.0024 EUR/SEK 11.2891 EUR/NOK 10.7642 EUR/DKK 7.4383 USD/ILS 3.444 AUD/USD 0.6912 NZD/USD 0.6362 USD/SGD 1.3291 USD/JPY 131.02 USD/CNH 6.7531 USD/INR 81.5763 EUR/ILS 3.708 GBP/ILS 4.1923 USD/ZAR 16.8525
UK inflation likely moved past its peak in November dropping 10.7% from 11.1% in October. Current forecasts see Annual CPI remaining above 9% until April, which could see the Bank of England push rates higher through the early part of 2023.EUR
The Italian treasury forecasts paint a better picture for debt figures in the short-term. Forecasts show the debt-to-GDP ratio falling out to 2025. However, during this period only 30% of the burden from higher interest rates will have filtered through by then. The picture deteriorates significantly in the following years.
Consumer expectation for inflation over the next 12 months have declined to 5% in November from 5.4% in October the ECB said in a statement summarising its monthly survey.USD
December’s US CPI report will likely dominate the markets today. The consensus expects outright deflation in the headline figure today with the expected figure at 6.5% down from 7.1% last month. If inflation does decline, this may help to build the case for the Fed to downshift further to 0.25% hikes at each of its next two meetings. Any surprise to the upside on the inflation print could spark volatility in FX markets, which could see a return of Dollar strength, as the market readjusts for higher rate expectations.ASIA/PACIFIC
Australia’s CPI surprise earlier this week isn’t likely to impact the policy of the RBA. The fuel-price increase that drove the November data has showed signs of reversal. Current expectations see the RBA delivering a final rate hike in February, then pausing until the fourth quarter.
The Modi administration’s distribution of free rice and wheat to the poor will lower Indian inflation by as much as 0.35% in 2023. This could mean the Reserve bank of India could forgo their final rate hike.ILS
Israeli PM Netanyahu announced his plan to counter Israel’s high cost-of-living. They will freeze property taxes for a year and cancel/cut back recent hikes in the cost of electricity, water and fuel.Data & Events
US – CPI
US – Jobless Claims
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