UK CPI falls for second consecutive month, markets await US economic data, yen slips against the greenback after BoJ inaction
January 18, 2023
Rates 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.
GBP/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
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.EUR
The 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%.USD
Markets 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/PACIFIC
Markets 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.ILS
USDILS 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 & Events
US – Industrial Production
US – Retail Sales
US – PPI
EU - Euro-Area CPI
Fed Beige Book
Trading in financial instruments may involve a high degree of risk and may not be suitable for all investors. Trading in financial instruments can result in both loss and profit. Investors should carefully consider whether financial instruments suit their needs, financial resources and personal circumstances.
The information contained in this material is solely for informational purposes only and it is not and should not be construed as an offer or a solicitation of an offer to buy or sell any financial instruments and cannot be relied upon as a representation that any particular transaction necessarily could have been or can be effected at the stated prices. This material does not contrue advice.
For more analysis on FX markets or information regarding SVB's FX services:
0800 023 1440 from within the UK
+44 207 367 7880 from overseas
See all of SVB's latest FX information and commentary.
© 2023 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB).
Silicon Valley Bank is registered in England and Wales at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, UK under No. FC029579. Silicon Valley Bank is authorised and regulated by the California Department of Business Oversight and the United States Federal Reserve Bank; authorised by the Prudential Regulation Authority with number 577295; and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Silicon Valley Bank is a subsidiary of SVB Financial Group, a Delaware corporation and is an affiliate of SVB Financial Group UK Limited. SVB Financial Group UK Ltd is registered in England and Wales at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, UK under No. 5572575 and is authorised and regulated by the Financial Conduct Authority, with reference number 446159. SVB Financial Group and its subsidiary Silicon Valley Bank are members of the Federal Reserve System and Silicon Valley Bank is a member of the FDIC.
Your eligible deposits with Silicon Valley Bank UK are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. Any deposits you hold above the limit are unlikely to be covered. Please click here for further information or visit http://www.fscs.org.uk. For more detailed information about coverage and limits, please review our FSCS Information Sheet at http://www.fscs.org.uk.
This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal, accounting and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources. Opinions expressed are our opinions as of the date of this content only. The material is based upon information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such.