Treasury Market Commentary –

Rate rises hinge on next week's UK inflation data

A weekly economic update from our Treasury team.

Published

11th August 2023

Category

Macro Commentary

US headline inflation ticked up slightly to 3.2%, with a core reading of 4.7%, reinforcing the view that the Fed will hold rates steady for the remainder of this year, with rate cuts forecast to start early next year as the focus switches from inflation to growth.

The Bank of England are fully expected to raise interest rates again next month, with potentially a further hike in November, as they continue to battle stubbornly high inflation. The committee faces the monumental challenge of bringing inflation lower without causing long term harm to the economy.

Critical UK data out next week, including the latest inflation report, jobs, and retail sales, which are the key drivers of monetary policy, will likely add to market volatility. 

The European Central Bank may have reached its peak interest rate following their recent hike, though a further increase later in the year remains live and data dependent.  

Elsewhere, the Chinese economy continues to weaken significantly, weighing on market sentiment and dragging on global growth.

On the exchanges, holiday trading conditions mean lower liquidity and a lack of any real conviction, with GBP/USD trading towards 1.2700, whilst GBP/EUR remains at the lower end of the established 1.1500 – 1.1750 range.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

15/8/23

UK Unemployment Rate 3Mths

4.0%

n/a

15/8/23

UK Average Weekly Earns. 3M/YoY

6.9%

n/a

16/8/23

UK CPI YoY

7.9%

n/a

16/8/23

UK Core CPI YoY

6.9%

n/a

16/8/23

UK RPI YoY

10.7%

n/a

18/8/23

UK Retail Sales YoY

-1.0%

n/a

18/8/23

EU CPI YoY

5.5%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2705

USD/JPY

144.70

GBP/EUR

1.1560

AUD/USD

0.6520

EUR/USD

1.0990

USD/CHF

0.8775

GBP/AED

4.6700

XAU/USD

1913

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7618

+2.24%

S&P

4468

+16.86%

EUROSTOXX

4384

+15.56%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

3.75%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+5.47%

5-year

+4.78%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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