Inflation risks

Today's news headlines: 

‘China’s Inflation Risks Build as Producers Pass on Higher Costs’. China’s producer price index has climbed 13.5% from a year earlier, the fastest pace in 26 years, while the Consumer Price Index rose at the quickest pace since September 2020. Both measures beat median forecasts, indicating broad-based inflationary pressure on both producers and consumers. Producers have toiled as the effect of the global commodity price rally and output curbs caused by the power crunch take effect, while some have passed those cost increases on to consumers through price increases. The data is unlikely to help China’s central bank, which may need to ease policy further to support the economy. (Bloomberg)

‘U.K. Living Standards to Suffer in 2022, Niesr Warns’. Consumers across the UK will experience a tightening in financial conditions over the next couple of years, with inflation, taxes, and interest rates all set to rise. The National Institute of Economic and Social Research has warned that growth will slow from 6.90% in 2021 to 1.70% in 2023 while inflation will reach 5.00% by June. The research group also warned that household inequality is set to widen as earnings growth will likely fall behind inflation—it’s forecast that the Bank of England will raise interest rates from 0.10% to 0.25% in December and then again to 0.50% in June. (Bloomberg)


Today

Stocks and equity futures fell overnight as Chinese data fueled concerns about the state of the global economic recovery. Markets are watching today’s US Consumer Price Index release closely as it could deliver the highest print since December 1990, with persistent price pressures threatening to derail the global stock rally.

Events

China’s CPI y/y: 1.5% vs 0.7% previously
China’s Producer Price Index y/y: 13.5% vs 10.7% previously
German Final CPI m/m: 0.5% vs 0.5% previously
Italian Industrial Production m/m: 9:00AM
German Buba President Weidmann speaks: 9:00AM
Monetary Policy Committee member Tenreyro speaks: 1:30PM
US CPI & Core CPI m/m: 1:30PM
US Weekly Jobless Claims: 1:30PM


Interbank rates:

GBP/USD – 1.3554
GBP/EUR – 1.1718
EUR/USD – 1.1568
USD/CAD – 1.2415

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