September 16, 2022

Daily Report 16/09/2022

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Sterling was unable to make headway on Thursday with the currency undermined by an underlying lack of confidence in the UK outlook. The latest Bank of England survey recorded an increase in 1-year inflation expectations to a record high of 4.9% from 4.6%, although the 2-year expectations index edged lower to 3.2% from 3.4%. Overall satisfaction in the bank’s control of inflation dipped to a record low. The data was compiled ahead of the government energy price cap announcement. Chancellor Kwarteng stated that the emergency budget will be delivered on September 23rd which will be on the day following the Bank of England policy meeting with markets expecting a package of tax cuts. The latest estimates on government borrowing will be watched closely in the data.

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Furthermore, the clear shift in the European Central Bank’s stance towards fighting inflation is also resonating: the ECB raised interest rates by an unprecedented 75 basis points on Sept. 08 and signalled it will maintain an aggressive stance on rates until it sees clear evidence price pressures are easing.

The sense of clarity and purpose at the ECB makes for a marked contrast with that of the Bank of England which continues to raise rates reluctantly; nervous that hiking will deal a setback to economic growth.

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The New York Empire manufacturing index improved sharply to -1.5 for September from -31.1 previously and well above consensus forecasts of -13, although this still reflected net contraction for the month. There was also a sharp turnaround in the new orders and components figures, but unfilled orders declined slightly. There was a net increase in employment for the month while there was a significant easing of cost pressure with prices received also increasing at a slower rate. Companies were slightly more optimistic over the outlook with inflation pressures expected to ease only slightly.

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14:00 Michigan consumer sentiment   Forecast.  60 Previous 58.2