Treasury Market Commentary –

Retail sales figures plummet as the cost-of-living squeeze continues

A weekly economic update from our Treasury team.

Published

24th June 2022

Category

Macro Commentary

UK headline inflation hit a fresh 40-year high of 9.1% last month, adding further pressure on the Bank of England to take stronger action, with the market forecasting a Bank rate towards 3% by year end.

The next Bank meeting is scheduled for August, and comments from officials this week indicated they may be more aggressive, raising the probability of a 0.50% hike.

Today’s retail sales figures showed a drop of 4.7% as the cost-of-living squeeze continues to hit the consumer.  

The Fed, meanwhile, is set to raise interest rates again next month, with another 0.75% hike a real possibility as they continue to act decisively against surging inflation.

There is a growing concern, however, that raising interest rates too aggressively may well tip each respective economy into recession, which in turn may lead to rate cuts next year, and these fears continue to weigh on global equities and the general risk-off sentiment.

Whilst in Europe, the central bank has flagged an initial rate increase in July as they begin their own cycle of policy tightening and will move away from the historic negative interest rate environment by September.

On the exchanges, GBP/USD remains hugely volatile between the recent lows of 1.2000 and the psychological 1.2500 level, whilst GBP/EUR has ongoing demand below 1.1500 but is so far lacking the momentum to break above the significant 1.1750 level.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

30/6/22

UK GDP QoQ

0.80%

n/a

30/6/22

UK GDP YoY

8.7%

n/a

1/7/22

UK Mortgage Approvals

66.0k

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

GBP/USD

1.2275

USD/JPY

134.65

GBP/EUR

1.1650

AUD/USD

0.6910

EUR/USD

1.0535

USD/CHF

0.9600

GBP/AED

4.5080

XAU/USD

1821

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7020

-4.93%

S&P

3795

-20.36%

EUROSTOXX

3436

-20.06%

UK Benchmark Rates

Swap Mid (SONIA)

 

2-year

+2.69%

5-year

+2.54%


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