Treasury Market Commentary –

UK mortgage payers anxiously wait for jobs and inflation data

A weekly economic update from our Treasury team.

Published

7th July 2023

Category

Macro Commentary

A relatively quiet week with the US holiday, as central bank monetary policy continues to dominate the narrative.

The Bank of England’s newest committee member underlined her hawkish outlook as she indicated she would support further rate hikes and the potential for rates staying higher for longer. It is however, a hugely challenging balance between taming inflation and causing long term harm to the housing market and the overall economy.

Markets continue to price in a Bank rate above 6% by year end with a strong possibility of another 0.50% hike in August, as UK government bonds trade at their highest levels since 2007. Inflation and the extremely tight jobs market remain key, with the latest jobs data due next week and inflation report the week after.

In the US, minutes from the recent central bank meeting showed that, despite last month’s pause, the Fed remains likely to raise rates by 0.25% this month, which may then be the peak, depending on the economic data. Today’s focus will be the payrolls numbers, whilst next week we get the latest inflation report, with the headline expected to drop to 3%.

For the European Central Bank, markets are forecasting two further hikes, including 0.25% later this month, as the focus remains on the inflationary outlook.

On the exchanges, markets continue to lack any real conviction or trend against the hugely uncertain backdrop. Sterling demand remains strong on the higher rate outlook, however the established short-term ranges of 1.2500 – 1.3000 versus the dollar and 1.1500 – 1.1750 against the Euro remain key.

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

11/7/23

UK Weekly Earns (ex-Bonus) 3M/YoY

7.2%

n/a

11/7/23

UK Unemployment Rate

3.8%

n/a

12/7/23

US CPI YoY

4.0%

3.0%

13/7/23

UK RICS House Price Balance

-30%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2645

USD/JPY

144.70

GBP/EUR

1.1630

AUD/USD

0.6625

EUR/USD

1.0870

USD/CHF

0.8990

GBP/AED

4.6440

XAU/USD

1906

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7275

-2.36%

S&P

4411

+15.36%

EUROSTOXX

4219

+11.23%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+6.33%

5-year

+5.53%


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