UK Inflation Forecasts to Impact Global Financial Markets

What’s threatening bank credit growth

As market analysts keenly await the country’s inflation data, influential financial updates from Britain are set to drive trading activities today. This follows a trend in North American markets where unexpected decreases in inflation figures have sparked investor interest.

Date: July 19, 2023

Place: New Delhi, India

UK bond markets, particularly, are poised for an expansion given the ongoing rally in government securities (gilts). If the trend follows, the pound sterling will likely relinquish its position above the $1.30 threshold.

June’s projected inflation data for the UK sees the Consumer Price Index (CPI) falling to 8.2% annually, while the core CPI is expected to remain steady at 7.1%. Given the significant levels of these projections, any unexpected surge would be unwelcome news for the markets.

Financial markets have already factored in an additional increase of 100 basis points in the Bank of England’s interest rates for the remainder of the year. However, after recent cautious comments from Klass Knot of the European Central Bank, the BoE may be uniquely positioned to implement rapid interest rate hikes on its own.

Meanwhile, New Zealand has sounded an alert during the Asia trading session. Persistent high food prices have kept the annual inflation rate at a higher-than-expected 6%. This has led traders to speculate that New Zealand’s interest rates may need to remain elevated for an extended period, which briefly boosted the country’s currency.

In Canada, the two core inflation measures used by the Bank of Canada have remained largely static at 3.8%, revealing little movement in the country’s economic health.

Concurrently, a slowing economy in China casts a slight shadow over the optimistic economic data and corporate earnings being reported in the United States. Hong Kong’s Hang Seng Index fell by another 1% on Wednesday, bringing its total loss for the year to approximately 5%.

On the corporate earnings front, high-profile companies Netflix, Tesla, and Goldman Sachs are due to release their financial results later in the day.

Earlier, the market reacted positively on Tuesday to better-than-expected profit reports from Morgan Stanley and other leading banks. Additionally, Microsoft’s announcement of new fees for advanced features within its office software suite—indicative of the company’s strengthening AI capabilities—pushed its shares up by 4%.


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Source- US News & World Report, Reuters, MarketScreener