November 25, 2022
Daily Report 25/11/2022
Bank of England Deputy Governor Ramsden stated that he expects further interest rate increases will be required and he was not convinced that domestically-generated inflation pressures are starting to ease. He added, however, that he would consider the case for cutting rates if the economy develops differently and he favours a watchful approach to policy setting. There were expectations of a less hawkish Bank of England policy, but the impact was offset by shifting global rhetoric. The UK CBI industrial orders index edged lower to -5 for November from -4 previously, but slightly better than consensus forecasts of -9. Output increased in the latest 3-month period, but companies expect a renewed contraction over the next three months. Inflation pressures are expected to remain high in the short term.
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The German IFO business confidence index recovered further to 86.3 for November from a revised 84.3 previously and significantly above consensus forecasts of 85.0. The current conditions component dipped to 93.1 from 94.2 previously, but there was a significant improvement in the expectations index to 80.0 from 75.9 in October. According to the IFO, the German economy is sending signals of hope and there was a net easing of supply bottlenecks. Nevertheless, close to 50% of companies are looking to increase prices within the next three months, maintaining concerns over inflation pressures. Minutes from October’s ECB meeting stated that there was a very large majority for the 75 basis-point increase and that there was a widely shared view that the inflation outlook continued to worsen. There were ECB source reports that the December rate increase was likely to be 50 basis points which triggered a Euro correction.
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Today sees another holiday-shortened US session following the Thanksgiving public holiday. Innovative US retailers have come up with the ‘Cyber Five’ sales promotion campaign which stretches from Thursday’s Thanksgiving all the way through to Monday. Expect to hear reports as to how this has gone, although high levels of employment and lower levels of petrol prices (now $4.30/gallon versus a high of $5.50 in June) suggest retail sales may hold up despite talk of the looming 2023 recession.
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