US Inflation data prints the highest in decades, increasing the rate hike forecast to 4 hikes in 2022. Sterling continues its rally trading at levels not seen since October.
January 13, 2022
GBP/USD 1.3742 GBP/EUR 1.1979 EUR/USD 1.1471 USD/CAD 1.2477 EUR/CHF 1.0473 EUR/SEK 10.2290 EUR/NOK 9.9149 EUR/DKK 7.4402 USD/ILS 3.1089 AUD/USD 0.7308 NZD/USD 0.6877 USD/SGD 1.3447 USD/JPY 114.45 USD/CNH 6.3653 USD/INR 73.9075 EUR/ILS 3.5671 GBP/ILS 4.2708 USD/ZAR 15.2778
GBPSterling continues its recent rally, trading at levels not seen since 29th October. GPBUSD trades in the 1.3744 region as we print, up 1.23% since the start of the week.
The UK Foreign Secretary, Liz Truss enters the latest round of post-Brexit negotiations over Northern Ireland. Liz is facing a tough choice between picking a fight with the EU which would gain the support of the conservative party, or cutting a deal to prevent a trade war. Following the most recent government scandal, Truss has now also positioned herself as a potential successor to Boris Johnson.
Boris Johnson apologised for his recent scandal at the PMQs yesterday, however was hit by an onslaught of fury from opposition party leaders and fellow Tory party members, calling for his resignation. Support for the PM is now at all time lows and many people feel it is just a matter of time before he steps down.
The BOE's attempt to launch a digital currency hit some barriers, after the House of Lords raised concerns about the project.
The FTSE dips 0.18% since the open, as we print.EUREURUSD gained further over yesterday's session jumping as much as 1% following the US inflation print to sit in the 1.1472 region as we print. EURUSD trades up 1.08% this week. The euro also gained vs the pound over yesterday's session, sitting in the 0.8350 region as we print, down 0.06% since the start of the week.
With the French Election fast approaching in April, president Macron should now be focusing on the robust French economy as a way to win voters in the Spring. After a hasty crash early in the Covid-19 pandemic, France has recorded an incredible standout rebound, with output now reaching pre-crisis levels, ahead of many peers.
European stocks declined on the open with the Euro Stoxx, CAC and DAX dipping 0.09%, 0.32% and 0.39% respectively as we print.USDUS Inflation data prints the highest in decades, printing at 7%, the largest YoY gain since 1982, intensifying calls for rate increases. The dollar printed lower on the release with the Bloomberg Dollar Index trading now trading down 0.96% since yesterday's London open.
Fed member James Bullard now expects four 2022 hikes instead of his previously stated three. He believes it is better to start sooner rather than later to avoid having to be more aggressive if inflation does start to moderate towards the central bank's target of 2%. Investors now expect policy makers to raise interest rates at their March meeting and signal a shift toward shrinking the Fed’s $8.8 trillion balance sheet later in 2022.
US stocks rallied with the Dow Jones, S&P and NASDAQ gaining 0.11%, 0.28% and 0.23% respectively.
The US government is now looking to send medical teams to some of the worst hit states to help hospitals that are struggling to deal with the most recent outbreak.ASIA/PACIFICAsian stocks declined following the US inflation print, with the Nikkei, Hang Seng and CSI gaining 0.96%, 0.08% and 1.64% respectively as we print. Benchmark treasuries dipped, oil slipped and Bitcoin dropped below $44k.ILSIn the past two weeks, the spread of the Omicron variant, continued to cause a sharp decline in consumer credit card spending , despite the unsurprising increase in spending at pharmacies.
USDILS was mixed over yesterday's trading, reaching lows of 3.0979 following the US CPI print, however since recovered to sit in the 3.1087 region as we print, up 0.15% this week.Data & EventsUK - BOE Mann speaks
Italy - November industrial production
Eurozone - ECB Guindos speak, ECB Elderson speaks
US - US weekly initial jobless claims, Dec PPI
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.
© 2022 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.