Treasury Market Commentary –

Focus shifts to UK Autumn Statement next week

A weekly economic update from our Treasury team.

Published

17th November 2023

Category

Macro Commentary

UK headline inflation dropped sharply to a 2-year low of 4.6%, reinforcing expectations that the Bank of England has reached peak interest rates, with forecasters now pricing in an initial rate cut by June next year. The jobs market data, however, was more of a mixed bag and although average earnings dropped to 7.9%, the market remains historically tight but should slow rapidly into year-end.

Next week’s market focus will be on the Autumn Statement and the implications for the economic outlook.

The key event this week for markets was the US inflation report, showing a drop to 3.2% in the headline rate, meaning the central bank is almost certainly done with rate rises and markets now bringing forward the timing and scale of expected rate cuts. This positive sentiment has driven a risk-on environment with equities rallying strongly across the board.

Whilst in Europe, with the economic outlook remaining incredibly challenging, the central bank is also forecast to begin an aggressive rate cutting cycle next year.

On the exchanges, the outlook for interest rate differentials is driving momentum with the dollar weakening significantly following the US inflation data. GBP/USD hit 2-months highs around 1.2500 where there is some initial selling interest, whilst GBP/EUR remains in a relatively tight range, just below the pivotal 1.1500 level.

GBP/EUR – 1-year chart

Graph GBP Currency Last Price 1 year chart

Week Ahead

Date

Release

Last

Expected*

21/11/23

US FOMC Minutes

-

-

22/11/23

UK Autumn statement

-

-

23/11/23

UK S&P/CIPS Services PMI

49.5

n/a

23/11/23

UK S&P/CIPS Composite PMI

48.7

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2385

USD/JPY

150.05

GBP/EUR

1.1420

AUD/USD

0.6470

EUR/USD

1.0845

USD/CHF

0.8885

GBP/AED

4.5520

XAU/USD

1986

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7410

-0.55%

S&P

4508

+14.59%

EUROSTOXX

4303

+11.86%

Central Bank Key Deposit Rates

BOE

FED

ECB

5.25%

5.25%

4.00%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+4.63%

5-year

+4.05xau%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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