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The new normal

Today's news headlines:

‘Central Bankers Write Requiem for Low-Inflation Strategies’. Yesterday, Federal Reserve Chair Jerome Powell and his European counterparts warned markets that the world is shifting toward sustained higher inflation, forcing them to tear up the playbook from the past 20 years. Bank of England Governor Andrew Bailey angled that sizzling price pressures are the result of a series of large supply shocks, forcing the world to bake scarcity of goods into future expectations. Central bankers are faced with the reality that unless they take almost overly aggressive action, inflation expectations could de-anchor. Powell himself conceded that officials could tip the economy into recession but that it was the lesser of two evils in trying to bring inflation back to the 2% target. (Bloomberg)

‘China’s Economy Shows Signs of Improvement as Covid Eases’. Both service and manufacturing activity picked up in the month of June as restrictions on Covid outbreaks were gradually eased. Shanghai, a financial hub for the nation, lifted a two-month lockdown at the start of June, allowing the resumption of broad economic activity. Still, with Xi Jinping’s administration sticking to its zero-Covid policy, the recovery remains fragile, with future restrictions likely. Meanwhile, the sustainability of the services rebound is being put into question by weak confidence data on incomes and the job market. (Bloomberg)


Overnight, Asian stocks fell along with US and European equity futures after stark warnings from central bankers over the inflation outlook. Both Sterling and the Euro remained muted against the US Dollar ahead of today’s US Core PCE Price Index data, which is the Federal Reserve’s preferred measure of inflation.


Chinese Manufacturing Purchasing Managers’ Index: 50.2 vs 49.6 previously
German Retail Sales: 0.6% vs -5.4% previously
Canadian Gross Domestic Product: 1:30PM
US Weekly Jobless Claims: 1:30PM
US Core Personal Consumption Expenditures Price Index: 1:30PM

Interbank rates:

GBP/USD – 1.2140
GBP/EUR – 1.1630
EUR/USD – 1.0440
USD/CAD – 1.2915

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