August 17, 2022

Daily Report 17/08/2022

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There was a measured reaction to the latest UK jobs data with evidence of limited cooling in the labour market offset by a stronger pace of wages growth. There was further speculation that wage growth was too strong to be compatible with the Bank of England inflation target and that the central bank would decide to sanction a further 50 basis-point rate hike at the September policy meeting in order to contain inflation pressures. Sterling briefly dipped against the dollar, but there was solid support on approach and the currency secured some relief later in the day, especially with the dollar paring initial gains. There was also some evidence of short covering ahead of Wednesday’s inflation data. UK consumer prices increased 0.6% for July with the year-on-year inflation rate jumping to 10.1% from 9.4%. This was above consensus forecasts of 9.8% and the highest rate for over 40 years. Core inflation also increased to 6.2% from 5.8%.

Key Data 

7.00 Consumer Price Index (YoY) (Jul) Act. 10.1% Exp. 9.8% Prev. 9.4%

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The German ZEW economic sentiment index dipped slightly further to -55.3 for August from -53.8 previously. This was slightly weaker than consensus forecasts and the lowest reading since 2008 while the current conditions index also edged lower to -47.6 from -45.8 in July. Although the main focus was on Germany, the Euro-Zone index also lost ground for the month. The data maintained fears over the German outlook, especially with an on-going focus on the surge in gas prices. The Euro was able to resist further selling pressure later in the day as equities moved higher and there were also reports that the German government would keep three nuclear power plants operational, although this was quickly denied by the government.

Key Data 

10.00 Gross Domestic Product (QoQ) (Q2) Exp. 0.7% Prev. 0.7%
10.00 Gross Domestic Product (YoY) (Q2) Exp. 4% Prev. 4%

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US housing starts dipped to an annual rate of 1.45mn for July from a revised 1.60mn the previous month which was below consensus forecasts of 1.54mn and the lowest reading since September 2020. Building permits edged lower to 1.67mn from 1.70mn, but beat market expectations. The data maintained reservations over the housing-sector outlook, although the permits data suggested underlying resilience. US industrial production increased 0.6% for July after a 0.2% decline the previous month and above consensus forecasts of a 0.3% increase. Treasuries edged lower into Tuesday’s New York open with the 10-year yield increasing to around 2.82%.

Key Data 

13.30 Retail Sales (MoM) (Jul) Exp. 0.1% Prev. 1%
13.30 Retail Sales Control Group (Jul) Exp. 0.6% Prev. 0.8%
19.00 FOMC Minutes