The British pound was supported yesterday by better than expected UK consumer inflation, which rose at the fastest annual pace in nearly 30 years in January. In fact, the headline CPI edged higher to 5.5% YoY rate from 5.4% previous and strengthened the case for additional rate hikes this year by the Bank of England. Tensions over the Northern Ireland Protocol held back traders from placing aggressive bullish bets around sterling and capped gains for the British currency. Investors also waited later in the day for the release of the FOMC minutes from America.
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European Central Bank Governing Council member and Latvian Central Bank Governor Martins Kazaks said on Wednesday that an interest rate hike this year is “quite likely”. The policymaker, however, recommended a careful, phased policy adjustment and said that money market bets, which attribute some possibility to a first ECB rate hike by the end of 2022, are somewhat too harsh. It’s worth noting that the recent positive rhetoric from the ECB policymakers will be on test today by the ECB Economic Bulletin, published eight times in a year. Also important will be comments from ECB Chief Economist Philip Lane.
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9.00 Economic Bulletin
14.00 ECB’s Lane Speech
The Federal Open Market Committee (FOMC) Minutes showed hawkish concerns among the board members but marked no strong support for a 0.50% rate hike in March, which may be due to the pre-inflation analysis. Federal Reserve officials agreed last month that it was time to tighten monetary policy, but also that decisions would depend on a meeting-by-meeting analysis of data, according to the minutes. Retail Sales and Industrial Production rose notably beyond the market forecasts and previous readouts with the latest MoM figures of 3.8% and 1.4% respectively in January. The same raises prospects of the Fed’s rate-hike and also highlights the latest disappointment over the policymakers’ refrain to act.
Key Data
13.30 Initial Jobless Claims (Feb 11) Exp. 219K Prev. 223K