IFX Market Report: Wednesday 22nd June 2022

UK inflation continues to rise to 9.1% in May, its highest level since 1982. US dollar strengthens, cashing in on its safe-haven status, as fear of recession mount. The Japanese yen is at its lowest level against the dollar since 1998, weakening by 18% since the start of the year.

The pound is on the defensive with British inflation figure at its highest in 40 years. Soaring food prices pushed UK Core Price Index to a new 40-year high last month of 9.1%, official data showed this morning. Consumer prices rose above 0.7% on a month-to-month basis, slightly above the expected 0.6% but still lower than the 2.5% increase in April when the energy price cap was increased. The UK’s Office for National Statistics (ONS) said that the estimations suggested that inflation was its highest since 1982.

The safe-haven dollar gained ground against most currencies as investors became nervous again about global growth prospects, while the yen hit a 24-year low, high bond yields in the United States and in Europe contrasting with low Japanese interest rates. Investors turned to the dollar amid a move away from riskier assets, which also saw the stock market rally falter. Today's main event is the start of US Federal Reserve Chairman Jerome Powell's two-day testimony to Congress as investors seek fresh clues on the possibility of another 75-point rate hike. basis at the Fed's July meeting.

The yen is up again on the day, having hit 136.71 in early trading, its lowest level since October 1998. The yen has now weakened 18% since the start of the year, while was just above 115.00 at the end of 2021. The currency weakened on pressure from rising energy prices on Japan's current account and the ever-widening spread between Japanese government bond yields and US treasury bills. Last week, the Bank of Japan kept interest rates ultra-low and vowed to defend its yield curve control policy, which effectively caps the yield on 10-year Japanese government bonds at 0, 25%.

Cable saw the Pound make lose ground yesterday with expected inflation data showing that prices are still increasing at a very rapid pace in the UK. GBPUSD opened at 1.2313 and close slightly under 1.2276.

EURUSD followed as similar trend with the pair opened at 1.0578 and closed at 1.0535, marking small gains for the USD, taking advantage of its status as a safe-haven from investors.
GBPEUR also saw small movements but small gains from the EUR as the pair opened at 1.1658 and closed to 1.1648.

Older posts
Newer posts