May 12, 2023

Daily Report 12/05/2023

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The Bank of England increased interest rates by 25 basis points to 4.50% at the latest policy meeting which was in line with consensus forecasts. The 7-2 vote for the move as Tenreyro and Dhingra again voted against any rate hike also met market expectations. The bank raised its growth forecasts with a substantial impact from the sharp decline in gas prices. The bank now expects positive growth in 2023 and 2024 with no quarters of negative growth. Overall, growth forecasts were revised higher by the largest extent since the bank gained independence in 1997.

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Amid the lack of new data, EUR investors may have been dwelling on recent events creating headwinds for the Euro. Last week, the European Central Bank (ECB) sparked an EUR selloff after slowing its pace of policy tightening to 25bps from 50bps. Although ECB President Christine Lagarde tried to sound hawkish following the decision, the Euro plunged nonetheless. Weak data also plagued the Euro, with German releases showing a worrying trend of larger-than-forecast declines in the industrial sector of the Eurozone’s largest economy.

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US initial jobless claims increased to 264,000 in the latest week from 242,000 the previous week. This was above consensus forecasts of 245,000 and the highest reading since January 2022. Continuing claims edged higher to 1.82mn from 1.80mn, but slightly below market expectations. US producer prices increased 0.2% for April compared with consensus forecasts of 0.3% with the year-on-year rate retreating to 2.3% from 2.7%, marginally below expectations of 2.4% and the lowest reading since January 2021. Core prices increased 0.2% with a slowdown in the annual rate to 3.2% from 3.4%.

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