September 15, 2022

Daily Report 15/09/2022

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Sterling briefly dipped lower after the UK headline inflation data came in weaker than expected, although the overall impact was measured. There was a limited  optimism that a lower inflation peak due to the energy price cap would improve the UK fundamental outlook. There was also an element of short covering ahead of next week’s Bank of England policy meeting with markets expecting a further rate increase of at least 50 basis points.

No Key Data

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Euro-Zone industrial production declined 2.3% for July after a 1.1% increase previously with an annual decline of 2.4%. EU Commission President von der Leyen stated that the EU had to acknowledge a new realty of higher public debt with proposals for additional spending of €140bn for member states to tackle the energy crisis. ECB council member Villeroy stated that monetary normalisation is fully warranted in the Euro-Zone and those rates could be close to a neutral area of around 2.0% by the end of 2022. Chief Economist Lane stated that interest rates would continue to increase with a generally hawkish stance. Higher fiscal spending would tend to underpin economic sentiment, although deficit fears could also increase, especially in countries such as Italy. The Euro managed to stabilise and edge higher into the New York open, but it was unable to hold above parity amid the firm underlying tone.

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US producer prices declined 0.1% for August after a revised 0.4% decline the previous month which was in line with expectations with the annual increase slowing to 8.7% from 9.8%. Core prices increased 0.4% and slightly above expectations with the annual increase slowing slightly to 7.3% from 7.7% in July. The data maintained expectations that pressure from global supply chains was easing, but there were also still important reservations that underlying inflation pressures remained strong which would lead to further monetary tightening over the next few months with the Fed Funds rate expected to peak above 4.0%. There was still solid underlying dollar support amid expectations that the Federal Reserve would sanction a rate hike of at least 75 basis points at next week’s policy meeting.

Key Data 

13.30 Retail Sales (MoM) (Aug) Exp. 0% Prev. 0%
13.30 Retail Sales Control Group (Aug) Exp. 0.5% Prev. 0.8%