Today's news headlines:
‘UK inflation hits double digits for the first time in 40 years’. A rise in food prices made the largest contribution to July’s UK inflation print, which hit 10.1% from a year earlier. Today’s report, which will pile more misery on consumers, included core prices rising more than expected, while wages have rapidly fallen behind rising costs. The picture becomes increasingly murky for the Bank of England, which has forecasted a UK recession beginning in Q4 this year, lasting through to 2024. Officials have forecasted inflation to top 13% this year when the energy price-cap resets, the worst reading since September 1980 under the Thatcher government. (Bloomberg)
‘China’s Li urges more pro-growth policy as economy sputters’. Officials in six key provinces, which account for 40% of China’s economy, have been asked to increase pro-growth policies after July’s data indicated a slump in consumption. The meeting between Premier Li and officials came after Monday’s surprise interest rate cut by the PBOC amid a slowdown caused by the property crisis and covid-zero policies. Along with the likely issuance of local debt to pump-prime the economy, Li also stressed the importance of increasing competitiveness by opening up domestic markets to foreign investors. (Bloomberg)
Repricing of Bank of England interest rate expectations has supported the Pound this morning after the UK CPI print, with GBP/USD and GBP/EUR climbing above the 1.21 and 1.19 interbank levels, respectively. Asian stocks rose on anticipation of more stimulus to support the Chinese economy. A revival in US stocks from the recent bear market has come after bets that both inflation and central-bank hawkishness has peaked.
AU Wage Price Index q/q: 0.7% vs 0.7% previously
NZ Official Cash Rate: 3.00% vs 2.50% previously
UK CPI y/y: 10.1% vs 9.4% previously
UK Core CPI y/y: 6.2% vs 5.8% previously
US Retail and Core Retail Sales m/m: 1.30pm
FOMC Meeting Minutes: 7.00pm
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*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.