October 18, 2022
Daily Report 18/10/2022
New UK Chancellor Hunt stated on Monday that nearly all of the tax measures in the September fiscal statement would be scrapped with only the reversal to the National Insurance increase and cut in stamp duty remaining with legislation already underway for these two measures. Hunt also stated that there would be a review to the energy cost support package in April with an aim in cutting the cost to the Treasury. The promise of fiscal tightening helped underpin gilts with yields trading lower and the 10-year yield was below 4.00% which helped underpin Sterling. There were also hopes that there would be a recovery in risk appetite. UK yields remained at lower levels after the New York open which helped underpin Sterling and the UK currency also gained net support from a rebound in risk conditions and significant net gains in equities. Hunt also stated that the OBR forecasts would show debt falling as a percentage of GDP, although there was no timescale on the data. Overall political uncertainty remained intense as Prime Minister Truss remained in an extremely weak position.
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The Euro was able to secure a limited net advance ahead of Monday’s New York open with firmer equity markets triggering a limited retreat in the US dollar. Equities maintained a stronger tone and the Euro secured a further net advance before stalling. Bundesbank head Nagel stated that the ECB needed to withdraw monetary support quickly and not stop too quickly even with recession fears in Germany.
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The New York Empire manufacturing survey dipped to -9.1 for October from -1.5 the previous month and below consensus forecasts of -4.0. The new orders index was unchanged with slight growth, but shipments edged lower on the month. There was a further small increase in employment while inflation data was mixed with a faster rate of increase in costs, but prices received at a slightly slower rate. Businesses overall were less confident over the outlook on the month with inflation pressures expected to remain firm. The data overall triggered an element of optimism that overall inflation pressures were peaking which underpinned risk appetite and also sapped potential dollar support. A rebound in equities was also a key element in curbing potential US currency support.
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