April 13, 2023

Daily Report 13/04/2023

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Sterling was unable to make further headway after Wednesday’s European open with resistance levels tough to break down. Selling pressure was, however, limited by firm risk conditions and further gains in Uk equities. Sterling posted further gains after the US inflation data and moved higher. Bank of England Governor Bailey was optimistic over the financial-sector outlook but no made comments on the outlook for interest rates. UK GDP was unchanged in February compared with expectations of a 0.1% increase while there was a marginal 0.1% increase on a 3-month view.

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ECB council member Holzmann stated that the inflation outlook suggests another 50 basis-point rate hike in May. The hawkish rhetoric also underpinned the Euro and it strengthened sharply to test two months highs against the American currency. The Euro maintained a firm overall tone against the dollar.

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7.00 German Harmonised Index of Consumer Prices (YoY) (Mar) Act. 7.8% Exp. 7.8% Prev. 7.8

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Tight ranges prevailed ahead of the New York open with the caution ahead of the US data. US consumer prices increased 0.1% for March, slightly below consensus forecasts of 0.2% and the year-on-year inflation rate declined sharply to 5.0% from 6.0%. This was below expectations of 5.2% and the lowest headline reading since June 2021. Food prices were unchanged on the month with an annual increase of 8.5% while energy prices declined 3.5% to give a 6.4% annual decline. Underlying prices increased 0.4% on the month with the year-on-year rate edging higher to 5.6% from 5.5% and in line with market expectations. There was another monthly decline in used vehicles prices with an 11.2% decline over the year. There was a strong increase in transport services prices with a 13.9% annual increase with shelter prices increasing 8.2% over the year. There were further concerns over services-sector inflation outside the housing sector. The dollar dipped in immediate reaction to the data with relief that the core data was not even higher while there were also hopes that the headline figure would curb inflation expectations. There was only a slight shift in Fed Funds rate pricing with the chances of a further May rate hike seen at 67%.

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