July 14, 2023

Daily Report 14/07/2023

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Sterling overall was unable to make further headway during Wednesday with a hawkish Bank of England stance priced in and markets also fretting over the impact of higher interest rates on the economy. Global developments tended to dominate with the important US inflation release.

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The Euro edged lower into Wednesday’s New York open with reservations over buying the single currency further ahead of the US inflation data, but it held above a key level against the US dollar as US currency sentiment remained fragile. ECB chief economist Lane stated that the full economic impact of tightening will play out over the next couple of years.

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US consumer prices increased 0.2% in June, slightly below expectations of a 0.3% increase. The year-on-year inflation rate declined sharply to 3.0% from 4.0% amid a favourable base effect which was slightly below consensus forecasts of 3.1% and the lowest reading since April 2021. Markets are still very confident that the Federal Reserve will increase interest rates at the July policy meeting, but the chances of a further increase in September declined to just below 15%.

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