Treasury Market Commentary –

Markets expect big rate rises from central banks next week

A weekly economic update from our Treasury team.

Published

9th December 2022

Category

Macro Commentary

Market focus is very much on next week’s central bank meetings, with the Bank of England, Fed and European Central Bank all set to raise rates by 0.50%.

Further hikes are expected in the coming months as the fight against high inflation continues, however, we expect rates to peak around mid-2023, followed by potential rate cuts as the focus turns to recession and growth.

The latest US inflation data will also be released next week, which is critical to the Fed’s future interest rate path and the pricing of global asset classes. It is also a busy week for UK data, with inflation, jobs, and retail sales figures all due. This week’s data has reiterated a slowing UK housing market with the biggest monthly price drop since 2008.

Events in China continue to be a major focus, with markets optimistic that further covid reopening into next year can help underpin economic growth.

On the exchanges, dollar weakness remains the dominant theme with GBP/USD holding near its 3-month highs above 1.2000, whilst GBP/EUR remains volatile within the well-established 1.1250 – 1.1750 range.

Market liquidity is gradually dropping as we approach year-end and traders look to mitigate risk as attention turns to the new year.

GBP/USD – 1-year chart

Treasury Market Commentary

Week Ahead

Date

Release

Last

Expected*

13/12/22

UK Average Weekly Earns. 3M/YoY

6.0%

n/a

13/12/22

US CPI YoY

7.7%

7.3%

14/12/22

UK CPI YoY

11.1%

10.9%

14/12/22

UK RPI YoY

14.2%

n/a

14/12/22

US FOMC (Upper Bound Rate)

4.00%

4.50%

15/12/22

UK Bank of England Bank Rate

3.00%

3.50%

15/12/22

EU ECB Main Refinancing Rate

2.00%

2.50%

16/12/22

UK Retail Sales YoY

-6.1%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2250

USD/JPY

136.35

GBP/EUR

1.1595

AUD/USD

0.6765

EUR/USD

1.0565

USD/CHF

0.9335

GBP/AED

4.5030

XAU/USD

1791

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7479

+1.29%

S&P

3963

-16.84%

EUROSTOXX

3922

-8.74%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.28%

5-year

+3.74%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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