Treasury Market Commentary –

UK's economic focus: inflation and jobs data

A weekly economic update from our Treasury team.

Published

13th October 2023

Category

Macro Commentary

In the UK, market focus is very much on next week’s critical inflation and jobs data, which remain the key drivers of Bank of England monetary policy. Consensus is very mixed on whether we get one further hike from the Bank, or whether rates have already peaked, with much of the tightening over the past year yet to fully feed through. Interest rate cuts are priced in for the latter half of 2024 as the focus will switch from inflation to stimulating growth.

US headline inflation was a slightly stronger than expected 3.7%, keeping a further hike from the Fed very much in play and pushing treasury yields higher. However, the committee will need to balance the impact of this aggressive tightening cycle on economic activity. Interest rate cuts are priced in for the second half of next year.

In the Eurozone, rates are likely to have now peaked, with rate cuts expected in the second half of 2024 as the growth outlook remains bleak and a recession is a real possibility.

The effect of the war in the Middle East continues to drive oil prices higher, further stoking inflationary pressures and weighing on investor sentiment.

On the exchanges, we have seen some dollar weakness following its recent strong rally, but the economic fundamentals continue to favour the US. GBP/USD has pushed higher from its recent 6-month lows near the critical 1.2000 level, whilst GBP/EUR has found a short-term base at 1.1500.

GBP/USD – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

16/10/23

UK Rightmove House Prices YoY

-0.4%

n/a

17/10/23

UK Average Weekly Earns. Ex-Bonus 3M/YoY

7.8%

n/a

17/10/23

UK Unemployment Rate 3Mths

4.3%

n/a

18/10/23

UK CPI YoY

6.7%

6.2%

18/10/23

UK RPI YoY

9.1%

n/a

18/10/23

EU CPI YoY

4.3%

n/a

20/10/23

UK Retail Sales YoY

-1.4%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2215

USD/JPY

149.70

GBP/EUR

1.1580

AUD/USD

0.6325

EUR/USD

1.0550

USD/CHF

0.9065

GBP/AED

4.4885

XAU/USD

1881

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7676

+0.02%

S&P

4349

+13.29%

EUROSTOXX

4229

+8.10%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+5.08%

5-year

+4.54%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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