US Inflationary pressures still prevalent, Sunak persists in EU trade negotiations, Israeli protests intensify outside Knesset.
February 20, 2023
GBP/USD 1.2028 GBP/EUR 1.1255 EUR/USD 1.0687 USD/CAD 1.3468 EUR/CHF 0.9865 EUR/SEK 11.1069 EUR/NOK 10.9879 EUR/DKK 7.4462 USD/ILS 3.5585 AUD/USD 0.6898 NZD/USD 0.6232 USD/SGD 1.3358 USD/JPY 134.11 USD/CNH 6.8658 USD/INR 82.7375 EUR/ILS 3.8028 GBP/ILS 4.2799 USD/ZAR 18.1126
GBPUSD reached lows of 1.1915 Friday after USD was bought following better than expected US CPI release. GBP has since however recovered and sits above the 1.2045 region as we print.
UK politics will be the focus this week, as Rishi Sunak works towards securing a post-Brexit trading deal with the EU. Over the weekend, he sought views from conservative party lawmakers - whilst 90% of his demands have already been secured, he has struggled to convince the bloc that they should have no role in Northern Ireland.
Property prices are surging in North London and young professionals return to the capital - prices in Camden jumped 17.2% YoY whilst Barnet and Islington gained 8%, according to Rightmove. House prices jumped 3.9% YoY across the nation.EUR
EURUSD reached lows of 1.0613 following better than expected US CPI release Friday, however, has since recovered this morning and sits in the 1.0700 region as we print.
Two key ECB officials Schnabel and Villeroy stressed on Friday, that they are concerned over persistent underlying inflation and opposed the current market pricing for interest rates. The ECB has vowed to make another significant rise in March; however, markets believe some of its guidance in unclear, and have now priced in a peak rate of 3.75% by late summer. The Eurostoxx 50 has gained 0.16% since the open.USD
Last week saw markets remeasure their expectations of disinflation, as CPI, PPI and retail sales all moved to show that inflation is increasingly persistent. The markets have now priced in a higher peak funds rate of 5.3%.
- January’s CPI print showed that core good disinflation has run out of stream as core-good prices rose 0.1% month-on-month in January.
- The Producer prices Index surprised by increasing 0.7%, this could contribute to an inflationary tailwind as prices trickle through to the consumer.
- Retail sales increased by 3%, against an expected 2%, highlighting the robust consumer appetite. As spending remains high, this shows that the tighter monetary conditions are not dissuading households from spending.
The Pentagon’s top China official, Michael Chase, visited Taiwan today, which is the first trip by a senior defence official since 2019.
Some believe that BOJ governor Kuroda, could surprise markets next month, if he attempts to smooth the transition to his nominated successor.ILS
Israel’s central bank may need to surpass an interest rate by the Federal Reserve for the first time since starting its tightening cycle. Central bankers may be motivated to hike further as they try to fight off inflationary pressures, and the FX pressure on the shekel.
Protests have intensified as Knesset members plan to vote on the judicial overhaul. USDILS trades 0.5% higher, well above the 3.55 handle.Data & Events
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