Home Daily Commentaries Inflation concerns moves markets

Inflation concerns moves markets

Thursday 13 April, 2023

Daily Currency Update

US consumer prices edged 0.1% higher in March, data showed Wednesday, resulting in an annual increase of 5%. This is the smallest 12-month gain since May 2021. Underlying inflation pressures remain strong, with core CPI, which excludes volatile foods and energy prices, rising 5.6% on an annual basis, up from 5.5% the prior month. The news suggests that the Federal Reserve will raise interest rates again next month. The FOMC meeting minutes painted a slightly different picture for nearer the end of the year, as the March notes suggested a mild recession is projected. This may force the US central bank to cut the recent rises. GBP/USD had been on the decline ahead of the inflationary data, touching 1.2400 at the lows but testing 1.2500 after the news. EUR/USD had been trading in the low 1.0900 ahead of the releases but has been testing 1.1000 since.

UK Monthly GDP is estimated to have shown no growth in February 2023. This follows the growth of 0.4% in January, revised up from growth of 0.3% in the previous release. The news is just off the forecast of 0.1%. Later in today’s session, we have more inflationary data to digest from the US – PPI and core PPI month-on-month. At the same time we will also hear about the latest US unemployment claims. US data is set to continue market volatility today

Key Movers

Global inflation is still causing headaches for central banks who are trying to tackle the problem with interest rate hikes while trying to avoid domestic recessions. The most recent set of data from the US suggests that further rate hikes are likely, the European central bank will likely continue hikes rates with Germany’s consumer prices rising 0.8% on the month in March, up 7.4% on an annual basis and the UK inflation remains in double digits after accelerating to 10.4% in February. It seems, however, that the US could be the first to stop interest rate hikes and maybe even cut interest rates before the end of the year and this is showing in recent USD movement. EUR/USD is now back above 1.1000 and GBP/USD 1.2500.

Expected Ranges

  • GBP/USD: 1.2390 - 1.2610 ▲
  • GBP/EUR: 1.1330 - 1.1410 ▼
  • GBP/AUD: 1.8490 - 1.8680 ▼
  • EUR/USD: 1.0890 - 1.1070 ▲