May 30, 2022

Daily Report 30/05/2022

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Thursday’s UK fiscal support package from Chancellor Sunak continued to provide an element of support for Sterling, especially given speculation that there could be scope for a more restrictive Bank of England policy stance as fears surrounding the outlook for spending ease. Sterling moves were, however, influenced primarily by global risk conditions during Friday. Equites made net gains which helped protect the UK currency. CFTC data recorded a renewed net advance in short non-commercial Sterling positions to just above 80,000 in the latest week from just above 79,000 the previous week. This was the largest short position since September 2019, maintaining the potential for short covering if there is a shift in UK sentiment.

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Euro-zone M3 money supply growth slowed to 6.0% in the year to April from 6.3% previously while private-sector loan growth was unchanged at 4.5%. Bundesbank head Nagel stated that the first rate move should take place in July with more to follow in the second half of the year and he also called for a strong signal at the June meeting. CFTC data recorded a fresh increase in long, non-commercial Euro position to a 6-week high near 39,000 from just above 20,000 previously. EU talks on an embargo of Russian oil will continue on Monday and the latest German inflation data will be watched closely with the headline rate forecast to increase to a fresh record high of 7.6%.

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13.00 German Harmonized Index of Consumer Prices (YoY) (May) Exp. 8% Prev. 7.8%

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The US PCE prices index increased 0.2% for April with the annual rate at 6.3% from 6.6% previously. The core index increased 0.3% on the month with the year-on-year increase slowing to 4.9% from 5.2% with both figures in line with market expectations. The data overall maintained an element of optimism that US inflation pressures were peaking which maintained hopes that very aggressive Fed tightening could be avoided and also helped underpin risk appetite. Personal income increased 0.4% for the month with a 0.9% increase in spending from a revised 1.4% previously. There was an element of relief surrounding the inflation data which maintained expectations that the Federal Reserve might be able to avoid more aggressive rate hikes.

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