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On October 14th, the New York Times analysis indicated that the final inflation report before the US midterm elections showed that the US CPI rose 3.7% year-on-year in September, higher than the expected 3.6%, and rose 0.6% month-on-month, in line with expectations. The core CPI, excluding volatile food and energy prices, rose 0.3% month-on-month and 2.6% year-on-year. The ongoing war with Iran continues to push up fuel costs, with energy prices rising 5.2% in September and 20.4% year-to-date. Gasoline prices alone rose 9.1% in September, and have risen 34.2% cumulatively over the past year. Rising fuel costs have also pushed up airfares, with airfares rising 1.2% in September and 22.4% year-to-date. From a political perspective, this is bad news for President Trump, who just last night attempted to demonstrate at a rally in Alaska that prices are improving under his leadership. The bond market reacted strongly, with US Treasury yields rising, especially for short-term bonds that are more sensitive to changes in interest rate expectations.October 14th - Driven by rising fuel costs, the US overall CPI rose at its fastest pace in five months in September, while the core CPI also exceeded expectations, continuing to squeeze household budgets ahead of the November midterm elections. This report indicates that the economy, and especially prices, will remain a focus ahead of the November 3rd midterm elections. This also helps explain why the market expects the Federal Reserve to raise interest rates again in the coming months, even if it chooses to hold rates steady at its upcoming policy meeting. This report is the last inflation data before the Feds October meeting, and Fed Chair Warsh will speak at the IMF meeting in Bangkok on Thursday evening New York time.October 14th - Analyst Chris Ansty stated that the latest communication from Federal Reserve policymakers indicates they have not laid the groundwork for consecutive rate hikes in October. Todays stronger-than-expected core CPI increase may not be enough to change that, but it will strengthen expectations of further tightening by the Fed. The September rate hike is almost certainly not a "one-off action." Overall CPI rose 3.7% year-on-year, the largest increase since May. This growth rate also significantly outpaced wage increases, meaning workers real income is unfortunately shrinking. Average hourly earnings fell 0.7% year-on-year in September. This is not a good data point for the government ahead of the midterm elections.BlackRock CEO Fink: BlackRock is pursuing a “very large deal” in the market.On October 14th, according to the Associated Press, two regional officials said Wednesday that the headquarters of Saudi oil giant Saudi Aramco was attacked by Houthi rebels overnight, with offices of senior executives being hit. This is the latest example of the Iranian-backed Houthi rebels ability to strike key targets despite prior warnings. Officials stated that the top three floors of a Saudi Aramco building housing executives were damaged. One official said the office of Saudi Aramcos CEO was also attacked. No injuries were reported. The Houthis previously claimed to have used ballistic missiles to strike Dhahran, where Saudi Aramcos headquarters are located, in their latest round of attacks. The Saudi-led military coalition fighting the Houthis previously stated that it had intercepted a ballistic missile targeting Dhahran, multiple cruise missiles and ballistic missiles targeting the capital Riyadh, and a cruise missile targeting Khairji, home to Prince Sultan Air Base and Saudi state-owned military-industrial company.

GBP/JPY Meets Resistance Near 158.00 As UK GDP Forecasts Weaken

Daniel Rogers

Feb 08, 2023 14:47

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The GBP/JPY pair has detected selling attention despite striving to extend recovery above the critical resistance of 158.00 in the Asian session. The less-confident pullback move by the Pound Sterling has been fined and the negative path for the cross has continued.

 

On Tuesday, the cross was heavily dumped by the market participant. Additionally, Bank of Japan (BoJ) officials admitted a covert operation to support the Japanese Yen.

 

Meanwhile, the impact of appointing BoJ Deputy Governor Masayoshi Amamiya as BoJ Haruhiko Kuroda's replacement has begun to be felt on the street. OCBC analysts examined the impact of each contender for BoJ's new leadership on the Japanese yen.

 

According to a letter from OCBC, "this week's focus will be on the list of BoJ nominees that is anticipated to be handed to parliament on 10 February, however reports indicate a postponement until next week." Amamiya’s appointment would be most advantageous to the Japanese Yen upward but Yamaguchi’s appointment might drag down Yen’s strength.

 

On the front of the United Kingdom, the Bank of England (BoE) has failed to meaningfully lower inflationary pressures despite being an early adopter of tight monetary policy throughout the pandemic and pushing interest rates to 4%. As a result of their inability to meet key expenses, households are suffering from the effects of a growing cost of living.

 

As reported by Reuters, according to a report from Britain's National Institute for Economic and Social Research (NIESR), "one in four British households would be unable to pay for food and energy without using up savings, borrowing, or seeking other assistance in the 2023/24 financial year, up from one in five in the current year."

 

The agency has cut its predictions for the Gross Domestic Product (GDP) from 0.7% to 0.2% and from 1.7% to 1.0% for 2024. Governor of the Bank of England Andrew Bailey's decision to boost interest rates in order to attain price stability has lowered the scale of economic activities.


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