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  • richard evans

US inflation numbers today kick off a few days of possible market turmoil

Good morning

After a fairly quiet start to the week with little in the way of economic data or central bank speakers, today marks the beginning of a few days of some of the biggest announcements we can get. US inflation today, UK inflation and FOMC rate announcements tomorrow, BoE, ECB and SNB rate announcements and US retail sales Thursday, UK retail sales Friday. Throw in a load of PMIs and it looks like we’re in for a busy week.

With GBPUSD currently 1.2265 and EURUSD 1.0550, we are at the upper end of recent ranges. The question everyone is asking is ‘where will they be ina few days time?’. Well experience tells us it is pretty pointless making predictions at a time like this, it really is something of a 50-50 call so perhaps I’ll give a suggestion, Mark can give another, and between us we’ll have someone who is right.

I do feel there is more risk at the moment of a weaker US dollar. I don’t think it would much more than a word from the Fed that rates are nearing a top, or some particularly weak US data to see further USD selling. Weaker than expected inflation today could well be the catalyst. Excluding food and energy, market looks for MoM around 0.6% and YoY up around 7.6%. In rates, a 50bps rise this week is already priced in, lower than the previous few rate rises, but Powell has talked of a higher peak into 2023. Any sign that peak may fall would certainly see some USD selling.

But of course it is not all about the US dollar. Yes, it has been driving the currency world in recent months but both ECB and BoE also set to announce rate increases. Both are having a tough time with inflation amid poor growth so the key here will be the statements issued by both about the outlook. UKK chancellor Hunt has made it clear we in the UK are in for some pretty rough times ahead.

While EU won’t escape tough times either, I wonder whether we need to see a little more GBP weakness, particularly against EUR. Mind you GBP has done well to brush off sxome mildly disappointing employment numbers that were released this morning. For the record, GBPEUR currently 1.1625, seeing signs of support on some news that UK will delay any action over the NI protocol until the new year, giving time for negotiations between EU and UK.

Elsewhere in the world, I see US scientists will be making an announcement over some success in their attempts to create nuclear fusion. It has been suggested they have successfully created more energy than was put in for the first time ever. Now we are not talking huge amounts of energy here but it is early days and it is hoped that this could well be the future of clean energy going forward. I seem to remember UK scientists have been trying the same, I’m sure other countries are too. I wonder if we’ll see it working in our lifetime.

It certainly won’t come soon enough though. Temperatures here have just crept back above zero, we are expecting a high of 1 degree Celsius today, not enough to melt the snow and ice that is lying around. Still, I wasn’t planning on going anywhere today, just as well given the fact that train strikes are taking place once again.

In other US achievements, NASAs Orion space craft returned to earth safely yesterday after its record breaking trip around the moon. Further tests likely in 2024 before attempting to put men on the moon again for the first time in 50 years.

Finally, todays sees the first of the World cup semi-finals, this one sees Croatia take on Argentina. Croatia were finalists back in 2018 and will be determined to go one better this time and lift the trophy. Argentina will be equally keen to reach the final, and it is likely to be Messi’s last major tournament and he’ll be looking to go out on a high. I was quite keen on seeing them do well although their behaviour in the quarter finals against the Netherlands was pretty disgraceful, with a total of 18 yellow cards and a red card being handed out and led to both sides facing disciplinary action from FIFA.

Let’s hope for a competitive but better behaved match this evening. Argentina are firm favourites at just under evens, but Croatia look reasonable value at 4-1.

- 10.00 German ZEW

- 13.30 US CPI

- 22.30 RBAs Lowe speaks

- 23.30 AUS Westpac consumer confidence

- 23.50 Japan tankan

- 04.30 Japan industrial production

- 07.00 UK CPI, RPI, PPI

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