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Tighten the Purse Strings

Today's news headlines:

‘UK’s Soaring Inflation Rate Erodes Jump in Shop Sales, BRC Says’ Consumers in the UK are still spending more to buy less, despite promotions around Christmas and the World Cup boosting shop sales the most since January. However, with inflation running at 11.1% the figures indicate that consumers are straining to maintain their standard of living despite the squeeze on incomes. Non-food retail sales were flat in the month of November, suggesting that most are cutting back on non-essential spending to absorb the rise in food and energy costs. (Bloomberg)

‘Australia Raises Key Rate to 10-Year High to Cool Inflation’ The Reserve Bank of Australia raised their cash rate for the eighth consecutive meeting while suggesting that rates would rise further in the coming months. RBA Governor Lowe indicated to markets that future hikes would be data dependent with inflation running at a three-decade high. The release boosted the Aussie Dollar above the 0.6735 handle against the Greenback although the RBA is expected to end their tightening cycle before the Federal Reserve. However, with today’s statement a little more hawkish than expected, markets could be underpricing the terminal interest rate in Australia. (Bloomberg)


Today

European equity futures tracked lower overnight following yesterday’s losses on Wall Street that came after stronger US services data boosted markets expectations of higher US interest rates. Economists from Goldman Sachs suggested that a higher terminal rate in the US, above 5%, remains possible despite less hawkish rhetoric from Fed Chair Powell. This could spell a weaker period for risk assets in the near-term.

Events

UK BRC Retail Sales Monitor: 4.1% vs 1.2% previously
Aussie Cash Rate: 3.10% vs 2.85% previously
German Factory Orders: 0.8% vs -2.9% previously
UK Construction PMI: 9.30am


Interbank rates*:

GBPUSD: 1.2205
GBPEUR: 1.1635
EURUSD: 1.0490
USDCAD: 1.3595

 

Please contact your Dealer about any upcoming FX requirements you may have, or call +44 (0)20 3465 8200. 

*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.