Yesterday’s trading session saw further market consolidation ahead of today’s US Producer Price Inflation data, and tomorrow’s inflation readings from the UK and the US. With US interest rate markets forecasting year-end cuts of 100bps and the UK 'only' pricing in 40bps, there is plenty of room for outsize currency moves if the data is out of line with current expectations.
USD eased marginally after the release of the latest NY Fed Survey of 3-year inflation expectations, which showed a steep fall of 0.6% with the reading down to 2.3%, marking the lowest reading since the survey began in 2013.
*Daily move - against G10 rates at 7:30am, 13.08.24
** Indicative rates - interbank rates at 7:30am, 13.08.24
This morning’s UK employment report showed a much larger fall in the unemployment rate than forecast. Market expectations were for the rate to marginally increase from the previous month’s reading of 4.4%, but instead declined to 4.2%.
Countering the strong unemployment headline, average earnings came in softer at 4.5% v 4.6% which will be of some comfort to the hawks on the Bank of England’s MPC.
Elsewhere, recent steep declines across the commodity complex are indicating a slowdown in Global demand with OPEC yesterday cutting its Oil demand forecasts for this year and next. Next week sees the start of the Jackson Hole Symposium, where it has been announced UK BoE governor Bailey will speak. The event is held annually and hosted by the Federal Reserve Bank of Kansas City. Admittance is strictly by invitation only, bringing together central bankers, economists, US government representatives, financial participants and the media.
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