Treasury Market Commentary –

UK inflation rate expected to drop to 5%

A weekly economic update from our Treasury team.

Published

10th November 2023

Category

Macro Commentary

Markets have remained volatile following the recent central bank meetings, with comments from UK officials this week reinforcing expectations we have reached peak interest rates, and cuts could start from June next year. The focus now is very much on next week’s economic data, with inflation expected to show a significant drop towards the 5% level or below, and jobs market data which the Bank of England will be hoping continues to show signs of easing.

UK growth numbers this morning showed zero growth for the third quarter, highlighting the underlying economic weakness, with the outlook particularly bleak. Much of the rate tightening to date has yet to feed through to the consumer, and the unprecedented challenges facing the economy will continue into next year, with the added uncertainty of UK and US elections.

In the US, the latest critical inflation report is also due next week and will be key to short-term market momentum. The US economy continues to strongly outperform, though this is very much already reflected in market pricing.

Whilst in Europe, we also have some key data releases next week, including growth and inflation, which will drive short-term market sentiment. The European Central Bank seems likely to be first to embark on a rate cutting cycle, potentially as early as March.

On the exchanges, we are likely to see increased volatility next week on the slew of economic data releases, which will drive direction, against a backdrop of high uncertainty and low conviction. 

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

14/11/23

UK Average Weekly Earns. 3M/YoY

8.1%

7.9%

14/11/23

UK Claimant Count Rate

4.0%

n/a

14/11/23

EU GDP SA YoY

0.1%

0.1%

14/11/23

US CPI YoY

3.7%

3.3%

15/11/23

UK CPI YoY

6.7%

4.8%

15/11/23

UK RPI YoY

8.9%

n/a

17/11/23

UK Retail Sales YoY

-1.0%

-1.6%

17/11/23

EU CPI YoY

4.3%

2.9%

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2230

USD/JPY

151.35

GBP/EUR

1.1460

AUD/USD

0.6360

EUR/USD

1.0675

USD/CHF

0.9030

GBP/AED

4.4930

XAU/USD

1956

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7455

+0.05%

S&P

4347

+13.23%

EUROSTOXX

4229

+11.48%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.81%

5-year

+4.30%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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Weekly

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