US shows early sign of inflation peak

Today's news headlines:

‘Fed leaders, unswayed by softer CPI see rate hikes into 2023’. US Consumer Price Index rose by 8.5% year over year in July—around 20 basis points lower than analysts’ estimates—in the first sign that US inflation is easing. Senior Federal Reserve officials have maintained that the path of hiking rates will continue for the foreseeable, with inflation expected to remain well above the 2% target into 2023. Market pricing has since turned dovish, with the probability of rate cuts increasing from May next year. (Bloomberg)

‘Liz Truss’s plan for BOE seen as threat to Pound and UK bonds’. Liz Truss, the front runner to be the next UK Prime Minister, has been vocal in her criticism of the Bank of England’s management of inflation. Truss claims the central bank was too slow in reacting to rising prices and began its monetary policy tightening path too late. This has prompted the Tory party candidate to propose a shake-up of the BoE’s mandate, including a widening of the inflation target. The proposals, if pursued, could place a higher risk premium on UK gilts, pushing yields higher. (Bloomberg)


Today

Asian shares moved higher overnight as signs that US inflation may have started peaking buoyed risk assets, and European markets have followed suit. The US Dollar is trading marginally lower this morning while European natural gas prices rise to their highest level for two weeks.

Events

UK RICS House Price Balance (July): 63% (est. 60%)
US Producer Price Index and Core PPI MoM (July): 1:30PM
US Unemployment Claims (Aug 6th): 1:30PM
New Zealand BusinessNZ Manufacturing Index: 11:30PM


Interbank rates:

GBP/USD: 1.2224
GBP/EUR: 1.1848
EUR/USD: 1.0317
USD/CAD: 1.2767

The markets are moving. To speak to our team, please call +44 (0)20 3465 8200.