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Inflation figure released at 9.1%

Lee Mallin 22 June 2022

GBP: Sterling falls in the aftermath of the release of inflation data

EUR: German growth cut from 3.6% to 2.2%

USD: Fed Chair Powell’s testimony to Senate today

Sterling

The pound fell after the release of UK Inflation data which came in largely as expected, some elements of the report were softer and this could prove supportive of sterling. CPI rose 9.1% year on year in May, up slightly on April’s figure of 9.00% and in line with the market's expectations. The headline numbers will not prevent the BoE from raising rates further but may be opting for a 25bp hike in August as opposed to a 0.50bp hike.

Fuel, energy and food prices soar at the fastest rate for 40 years.

Euro

ECB Vice President Luis De Guindos stated that fragmentation instruments should not interfere with the overall monetary policy approach, which should be focused on fighting inflation. The ECB are committed to combating it through details that have still not been discussed at the Governing Council yet.

German growth was cut yesterday from 3.6% to 2.2% for Europe’s biggest economy amid the war in Ukraine, expecting it to pick up slightly in 2023 to 2.5%.

The German economy minister has sounded the alarm bells on the reduced natural gas supply and energy issues are also cited as a reason for downgraded numbers.

USD

Fed Chair Powell delivers his semi-annual Testimony before the Senate at 1.30pm. Comments should be relatively consistent although there could be some hawkish tones if he makes it clearer that a 50bps hike is the new norm, or if he puts 100bps on the table in case future inflation continues on the upside. The Fed’s Evans speaks on the economic outlook later this afternoon.

Market rates

Today's Interbank Rates at 10:52am against sterling movement vs yesterday.

Euro

€1.163 ↓

US dollar

$1.223 ↓

Australian dollar

$1.774 ↑

South African rand

R19.56 ↑

Japanese yen

¥166.2 -

Have a great day.