Market Report : 22.06.23

Published: 22/06/2023 By ECAP

The Bank of England's monetary policy committee will unveil the 13th interest hike in a row at midday today as they look to get a grip on inflation that has remained stubbornly high. This follows yesterday's inflation figures that delivered unwanted surprises as the consumer price index remained at 8.7% and core CPI rose to a 31-year high of 7.1%. Looking forward, a rise in interest rates to 4.75% was widely expected before yesterday’s CPI release, but some economists are now predicting a move to 5% today, with odds on further hikes also moving as a result of the stubborn inflation figures.

The Euro remains buoyed by persistently hawkish sentiments from European Central Bank policymakers, allowing the common currency to shrug off a lack of impactful data releases. However, while some ECB members have maintained a hawkish angle, others have indicated a more dovish outlook for the future. In fact, policymaker Boris Vujčić warned of the risks of “doing too much vs too little”, and implied a soft landing from elevated inflation may not be possible. For now, downbeat forecasts for the German economy may have capped the Euro’s gains during the session.

The US Dollar remained in a tight range this morning as investors digested mixed signals on US monetary policy. Federal Reserve Chair Jerome Powell reiterated the bank’s hawkish stance when testifying before the House Financial Services Committee of Congress yesterday, although he did not directly signal that interest rates will rise in July. This was also contradicted by other Fed members calling for an extended pause in the central bank’s rate hike cycle to observe the effects of recent monetary policy tightening. Ultimately, the mixed signals weighed on the dollar, with the dollar index and dollar index futures falling slightly in Asian trade after overnight losses.