December 19, 2022

Daily Report 16/12/2022

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The Bank of England increased interest rates to 3.50% from 3.00% at the latest policy meeting which was in line with consensus forecasts. There was another split vote with Mann voting to increase rates to 3.75% while Tenreyro and Dhingra wanted to hold interest rates at 3.00%. The bank indicated that further rate increases are likely to be needed given the risk of increased domestic inflation pressures, although there was no clear guidance surrounding the scope for rate hikes.

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The Euro struggled for support ahead of Thursday’s US open with a retreat to against the dollar as the fragile risk tone continued. The ECB increased interest rates by 50 basis points to 2.50% at the latest policy meeting, in line with consensus forecasts. Bank President Lagarde stated that the primary inflation risk is on the upside and that markets should expect a series of 50 basis-point rate hikes for a period of time. She added that the ECB needed to do more on rates than priced in by markets. In response, there was an upgrading of bank forecasts surrounding peak ECB rates.

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GBP/USD consolidates the recent losses amid a sluggish Friday morning in Europe. In doing so, the Cable pair portrays the trader’s positioning before the key UK/US data after bears cheered the Bank of England’s (BOE) dovish rate hike with the biggest daily slump in six weeks. The US Dollar’s failure to defend the previous day’s rebound from a six-month low, mainly due to mixed data and a lack of a major catalyst also favors the GBP/USD pair buyers. It’s worth noting that the US Retail Sales flashed -0.6% MoM figure in November versus 0.1% expected and 1.3% prior. Further, manufacturing survey details from Philadelphia Fed and New York Fed came in disappointing for the said month whereas Industrial Production eased in November and the Jobless Claims also dropped for the week ended on December 09.

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