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UK inflation prints at levels not seen since the 1980s
Whilst headline CPI shows signs of moderating, there may still be sticky elements that need watching.
The pair is in consolidation mode after Wednesday’s US inflation-fueled surge, little changed by the UK GDP release today
The pair jumped yesterday after US headline CPI eased, which led to dovish market repricing around the Fed’s next rate move, but some officials pushed back
The headline Consumer Price Index moderated to +8.5% y/y in July, from 9.1% in the prior month, while the core index proved more sticky, staying at +5.9% y/y
The NFP release was a big upside surprise. Unemployment dropped to 3.5%, and the economy created 528K jobs during July (vs 250K estimate). Expectations are now for another 75bps hike in September, with all eyes on today's CPI release. Last week saw both the RBA and BoE raise rates by 50bps, with the BoE's starling communication of 13% inflation by year-end and the onset of a recession. Friday sees UK…
The pair steadies today, after Friday drop due US unemployment decline to pre-pandemic levels and an overall strong jobs report, which boosts expectation for another big rate hike by the Fed
Fed officials start preparing market for further rate hikes.
The 10-yr real rate is just 7bps from 0 (black line chart), and the 5-yr is 7bps below 0 (red line chart). Given that interest rates are included in the denominator of the time value of money, this deterioration is supportive of present values. I.e. it is acting against the whims and desires of the Fed's stated intention of controlling inflation.
The Fed hiked rates by 75bps and cancelled forward guidance. GDP indicates a technical recession, and US inflation is still ticking at the highest level in 40 years. The Eurozone shows resilience but with savage inflation on its side of the pond. This week the BoE and RBA will hike rates, but there is scope for surprises. NFP Friday has a forecast of 250K jobs created in July. Yet, the…
The pair heads towards the conclusion of a very bad month and week, due to cool-down in Fed hike expectations and the negative Q2 GPD print from the US
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