UK CPI falls for second consecutive month, markets await US economic data, yen slips against the greenback after BoJ inaction
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FX Rates
January 18, 2023Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.
Source: BloombergGBP/USD 1.2335 GBP/EUR 1.1379 EUR/USD 1.0841 USD/CAD 1.3367 EUR/CHF 0.9923 EUR/SEK 11.1919 EUR/NOK 10.6829 EUR/DKK 7.4396 USD/ILS 3.3930 AUD/USD 0.7023 NZD/USD 0.6482 USD/SGD 1.3188 USD/JPY 129.74 USD/CNH 6.7629 USD/INR 81.4075 EUR/ILS 3.6780 GBP/ILS 4.1853 USD/ZAR 16.9482
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GBP
Consumer inflation in the UK fell for a second consecutive month in December, dropping from 10.7% to 10.5% in line with expectations, as fuel prices ease. However, core inflation, which strips out volatile food, energy, alcohol, and tobacco prices remained unchanged at 6.3 per cent. Some economists however believe that this will not deter the BOE voting members from a 50bp hike in February due to core inflation proving sticky and will alongside rapid wage growth and more resilient economy, suggest price pressure could prove persistent.
GBPUSD gained 0.37% prior to the release and has remained higher sitting in the 1.2325 region as we print. GBPEUR has however retreated dropping as much as 0.21% as eurozone inflation figures dampened gains there.
Nurses strike again today and warned that patients are dying unnecessarily as they campaign for higher pay.
EURThe euro has continued its rally against the dollar, gaining 0.5% this morning following comments from ECB member Villeroy. The Bank of France chief reconfirmed Lagarde’s recent guidance, that the decision will be data driven but the prospect of raising rates in 50bp increments remains valid.
German YoY inflation fell to 8.6% for December, down from 10% the previous month, driven by lower energy costs. The harmonized figure also slowed, to 9.6% against a previous print of 11.3%. Investor sentiment also turned positive for the first time since the outbreak of the Russia-Ukraine war, dampening recession fears as the ZEW index rose to 16.9, well above the -15 figure forecast.
Investor focus will turn to inflation data from the Euro Area today, where core inflation is expected to tick higher to 5.2%.
USDMarkets will be closely watching the economic releases today ahead of the Fed’s February meeting for which a downshift to 0.25% hikes has been heavily priced in. PPI, Retail Sales and Industrial Production due today will highlight if the tightening economic conditions have weighed on activity and price gains.
- PPI is likely to decelerate in December, as supply and demand factors come into a better balance. Core inflation is set to advance slightly by 0.1% however could show robust signs of moderation.
- Retail Sales are expected to decline in December, primarily driven by a decline in auto purchases and lower spending on gasoline due to falling prices.
- Industrial Production is anticipated to echo the ISM manufacturing survey with the current consensus seeing a 0.2% decline in the headline figure
Despite gains against the Yen, the dollar has lost 0.25% intraday, with both the euro and pound making gains against the greenback.
ASIA/PACIFICMarkets whipsawed following the Bank of Japan’s policy meeting. The yen now trades -1.3% lower against the dollar as the Bank of Japan left monetary policy unchanged. The market had expected some minor action from the central bank as the 10-year yield breached the BOJ target for a fourth day. Japanese bonds surged after the BOJ decision
In a major demographic shift for Asia, China’s population figures released earlier this week might highlight that India has now surpassed China as the most populous nation. As the nation continues to urbanise, the government is challenged to ensure job creation keeps pace with population growth.
ILSUSDILS slipped below 3.4 following global dollar weakness, trading 0.5% lower intraday.
The US has begun to use weapon stockpiles in Israel to supply Ukraine.
Data & EventsUS – Industrial Production
US – Retail Sales
US – PPI
EU - Euro-Area CPI
Fed Beige Book
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