UK inflation accelerates again to 40-year high, Mild winter could stave off recession for the EU, Strong earnings start bolsters S&P 500 rally.
October 19, 2022
GBP/USD 1.1261 GBP/EUR 1.1460 EUR/USD 0.9826 USD/CAD 1.3776 EUR/CHF 0.9824 EUR/SEK 10.9345 EUR/NOK 10.4023 EUR/DKK 7.4391 USD/ILS 3.5373 AUD/USD 0.6294 NZD/USD 0.5676 USD/SGD 1.4222 USD/JPY 149.44 USD/CNH 7.2434 USD/INR 82.3863 EUR/ILS 3.4757 GBP/ILS 3.9833 USD/ZAR 18.1680
Inflation rose to 10.1% from 9.9% the month prior. This matched a 40-year high reached in July. GBPUSD fell roughly 0.3% on the news. With inflation remaining well above the BoE’s 2% target, fears are mounting that prices could accelerate again once the government loosens support for household energy bills.
UK markets are braced for a sudden return of austerity with all government departments expected to be told to find savings amounting to roughly 15% of their budgets. Labour, the opposition party are already drawing comparisons to the austerity measures laid out by the coalition government between 2010-2015. This only compliments a strong lead in the polls for Kier Starmer’s Labour partyEUR
There may be some positive news for the European economy. High levels of gas storage in Germany and early signs from meteorologists that winter could be mild have sent spot prices tumbling in gas markets. Gas prices currently trade 10 times higher than their historical average, however, should prices ease amid reduced demand, this could avoid a recession as inflation subsides.
Some see the ECB having to raise rates by 1% through 2023 to reach the required terminal rate required to tame inflation.USD
US futures are higher following a strong start to the Q3 earning season, this helped to extend the S&P 500’s recent rally. Any rally in equities could be short-lived amid mounting recession risks, and a federal reserve that could deliver 75-bps hikes at both the November and December meeting.
Neel Kashkari has stated that even if rates rise above 4.5%, the Federal reserve will have to push further ahead on its tightening cycle if inflation remains persistently above the Fed’s target. Meanwhile, Bostic outlined that the Federal reserve would struggle to achieve maximum employment unless it can tame inflation in the short-term.ASIA/PACIFIC
Pakistan has stated that it needs additional funds to aid the flood-stricken nations recovery. The Pakistani PM stated that instead of debt restructuring the country needs additional funds to rebuild key infrastructure and enable growth.
Hong Kong has stressed that increasingly the cities appeal is a top priority. Chief Executive John lee said that Hong Kong will relax visa rules making the city more attractive to graduates and high earners. Over the last few years, amid social unrest Hong Kong has seen a talent migrate from the country losing ground to its regional rivals such as Singapore.ILS
Australia has reversed a previous decision to recognise Jerusalem as the Israeli capital, PM Yair Lapid has criticised the decision and summoned the Australian ambassador. USDILS trades slightly lower intraday.Data & Events
Several BoE speakers – Cunliffe/Mann
Russa Sept PPI
EIA Crude Inventory Report
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