Pound gains back as Bank of England expectations build, Market see ECB hiking by 1.5% before end of year, dollar strength may induce fed pivot should it weigh on economic activity.
September 27, 2022
GBP/USD 1.0799 GBP/EUR 1.1221 EUR/USD 0.9625 USD/CAD 1.3699 EUR/CHF 0.9517 EUR/SEK 10.8699 EUR/NOK 10.3466 EUR/DKK 7.4369 USD/ILS 3.5110 AUD/USD 0.6485 NZD/USD 0.5699 USD/SGD 1.4357 USD/JPY 144.43 USD/CNH 7.1688 USD/INR 81.5375 EUR/ILS 3.3792 GBP/ILS 3.7915 USD/ZAR 17.9698
Expectations are growing that the Bank of England will accelerate its hiking cycle, as financial market lost confidence in the UK’s fiscal policy. This was reflected yesterday in gilt markets, and through sterling, which now trades around 1.08.
The Bank of England will likely have to raise rates, with 140-bps currently priced in for the November meeting. This rate of tightening could quell inflation; however, it may lead to a sharp increase in mortgage defaults.EUR
Italy faces an EU budget deadline before Meloni’s newly elected government is set to take power. The government will likely send updated economic forecast to Brussels whilst any new fiscal policy information will have to be provided later. This could add to the ECB’s difficulty, Italy already has high borrowing costs with rate rises by the ECB likely to have harsher consequences compared to other bloc members.
Markets are currently consolidating around the ECB hiking rates by 75-bps twice in the remaining two meetings of 2022.USD
The dollar inched back from a record high yesterday, off the back of comments from several Federal Reserve officials reiterated the central bank’s hawkish position on monetary policy.
The dollar strength that has been the story so far of 2022, could be devastating to the global economy, and even come back to bite the US, according to Cathie Wood. The dollar’s strength could weigh on the US’s competitiveness and its economic activity eventually persuading the Fed to pivot from its hawkish policy path.ASIA/PACIFIC
China’s industrial profits fell 2.1% YoY in August. Japan’s producer prices gained 1.9% YoY.
The Bank of Japan announced an unscheduled bond buying operation across a range of maturities after 20-year bond yields rose to the highest level since 2015.ILS
USDILS continues to trade above 3.5 through the Rosh Hashanah holiday.Data & Events
Several ECB speakers
Several BoE Speakers
Hungary Rate decision
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