Daily Market Commentary 20th April 2023

The UK inflation remained stubbornly high, slipping to 10.1%, but expectations were for a fall below 10%. Core inflation remained at high levels and refused to budge, confirming the inflationary pressures remain dangerously high and ensuring upward pressure on interest rates. EU inflation was also high, although the headline number dipped to 6.9%, the core inflation actually pushed higher to 5.7%. This will ensure ECB rates continue to climb and add to the tighter monetary conditions. US Weekly Mortgage Applications contracted 8.8%, confirming the trouble in the housing sector. Fed members were out in the public arena talking rate hikes and pauses. Bostic pictured a final rate hike of 25 basis points, before a pause to reflect on the impact, while Bullard looks for rates to rise another 50 basis points. The US Dollar remained steady, with the EUR trading 1.0950, while the GBP held around 1.2450 despite the higher than expected inflation numbers.

The Japanese Tankan reports remained gloomy, hitting a two year low in business sentiment, absorbing the prospects of a recession in Europe and the USA. The static reserve allowed the AUD to settle around 0.6700, while the NZD trades around 0.6200, before key inflation data is due to be released today. CPI inflation number is expected to ease back from 7.2%, but the RBNZ’s aggressive rate hike of 50 basis points, at the last meeting, hints a some nasty numbers? A keen eye will also be kept on Japanese trade data out later today.