Currency Note

Markets poised for Britain’s yearly inflation rate

By Sharyh Murray-Francis May 22nd, 2023

Sterling enters the week stronger than a handful of its rivals compared to this time last Monday, including the euro, Japanese yen and Australian dollar.

Against the US dollar, the pound enters the week slightly lower than it did last Monday.

On the data front, the USA will dominate markets this week. There will be several speeches from members of the US Federal Reserve, as well as initial jobless claims, GDP and JOLTs to look out for.

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For the UK, it is a quiet data day today, but things pick up later in the week with yearly inflation and retail sales.

In the eurozone, markets will see Germany’s final yearly GDP rate on Thursday — as this is a final reading it shouldn’t cause too much volatility, but economists will be watching closely to see if the figures are in line with expectations.

In energy news, new forecasts from the Cornwall Insight say that energy bills for a typical household in the UK are expected to fall by nearly £450 from July. Some analysts predict the Office of Gas and Electricity Markets (Ofgem) will cap prices at £2,054 for July, followed by £1,976 in October. Ofgem will announce its new price cap on 25th May.

The latest preliminary GDP estimate for Germany showed that the country’s economy shrank 0.1 per cent, from a year earlier in the first quarter of 2023. This comes after a downwardly revised 0.8% expansion in the previous three-month period.

Some European equities ended last week on a positive note. The CAC 40 index rose over half a per cent, closing near a one-month high on Friday, as investors were monitoring debt ceiling negotiations in the US.

US equities had a less positive day on Friday. The Dow Jones ended the day more than 100 points lower, while the S&P 500 and the Nasdaq fell by 0.1 and 0.2 per cent, respectively. This also came as a pause in the U.S. debt limit discussions spooked investors.

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GBP: UK yearly inflation expected to ease

Yearly inflation in the UK is expected to ease again in this Wednesday’s data release by the Office for National Statistics. Markets expect annual inflation to ease from 10.1 per cent to 8.5.

GBP/USD over the past year

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EUR: Return of Germany’s Ifo business climate

In the last data release, the indicator hit its sixth consecutive period of increase, rising by 0.4 points from a month earlier to 93.6, in April 2023. This week, Germany’s Ifo business climate indicator is expected to dip slightly to 93.2.

USD: Up next, durable goods orders (MoM)

Monthly durable goods orders will be one of several US key releases scheduled for release this Friday.

The previous data revealed that, new orders for US manufactured durable goods rose by just over 3 per cent, recovering from a revised 1.2 per cent decline in February. All eyes will be on Friday’s data to see if figures decline as predicted.

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