Today's news headlines:

‘UK Plans for Blackouts in January in Emergency Energy Plan’. A combination of cold weather and gas shortages could lead to organised blackouts for the UK in January. In the Government’s latest ‘reasonable worst-case scenario’, emergency conservation measures might be enforced for a four-day period. If the winter is particularly cold, Britain will need to rely on pipeline shipments of gas from mainland Europe, where supply is already thin. To compound matters, life could get more difficult if the supply of electricity from mainland Europe is also curtailed. On this, Norway has already pledged to limit exports in winter to prevent domestic shortages. (Bloomberg)

‘China Consumer Inflation Reaches 2-Year High as Pork Surges’. Price pressures in China have accelerated to their highest level in two years, with its Consumer Price Index jumping 2.7% last month from a year earlier. Overall price pressures were kept in check by weaker consumer demand, but a 20.2% jump in pork prices fuelled the rise. In the year to date, China’s inflation has been muted compared to the US and other major developed economies, thanks partly to stricter Covid control policies. For the People’s Bank of China, this means policy should remain supportive, keeping a limit on Yuan strength. The Chinese currency has declined more than 7% against the US Dollar since February this year. (Bloomberg)

Today

Markets await today’s US CPI print with bated breath, with US and European equity futures on the back foot. Federal Open Market Committee policy will likely be largely dictated by the release, with St. Louis Fed President Bullard commenting that the US Central Bank should be prepared to keep rates ‘higher for longer’.

Events

Japan Producer Price Index y/y: 8.6% vs 9.4% previously
China Consumer Price Index y/y: 2.7% vs 2.5% previously
Chinese PPI y/y: 4.2% vs 6.1% previously
US CPI & Core CPI m/m: 1:30PM
US Crude Oil Inventories: 3:30PM

Interbank rates:

GBP/USD: 1.2084
GBP/EUR: 1.1832
EUR/USD: 1.0213
USD/CAD: 1.2880

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