Market had been getting complacent about a soft landing for the USA (and the world economy in general) and a view that the US rate rising cycle was slowing… however the data from last week at least muted those views. Americans signing on for unemployment benefits dropped unexpectedly last month and followed a much higher retail sales number and CPI running at a higher rate than expected.
This gave bond yields a fillip and the US$ took advantage as well and the market sentiment has flipped to seeing another three 25bps raises this year with a probable peak at 5.5%. The FOMC minutes this week will be interesting to see if they had prior “warning” that last weeks figures would be hawkish if so it begs the question why they only moved 25bps last time….The US economy is starting to look resilient to higher interest rates which is just as well as its looking as though inflation isn’t going to drop anytime soon with wage inflation a significant factor.
We do have the FED favoured inflation right at the end of the week and more than ever it will be watched and markets are likely to react.
Outside of the US other countries economic data is second rate bar the Japanese inflation rate which is likely to show a rise and thus pressure the Japanese into doing something about it – but I think we are still away from a rate rise although some more tinkering with bond rate boundaries is possible.
Commodities took fright from the likelihood of higher for longer rates with oil particularly under pressure as fears of world recession dented its appeal but taking a step back it really has been rangebound with 76.40 as the pivot point and 71.71 as the base – erosion through this level opens up 65 as a possibility and OPEC+ interest.
Metals similarly had a rough week especially palladium which has little investor demand and the automakers are finding ways to substitute it with platinum the lawmakers in Europe banning petrol and diesel cars from 2035 doesn’t help its forward pricing either.
Date | Country | Figures | Expected | Previous |
February 21 | GBP | CIPS Services PMI | 49.2 | 48.7 |
| GBP | CIPS Manufacturing PMI | 50.9 | 50.5 |
| EUR | Services PMI | 51 | 50.8 |
| EUR | Manufacturing PMI | 49.3 | 48.8 |
February 22 | EUR | IFO Business Climate | 91.4 | 90.2 |
| USA | FOMC minutes |
|
|
February 23 | USA | Initial Jobless Claims | 200K | 194K |
| USA | GDP growth rate | 2.9% | 3.2% |
February 24 | Japan | Inflation Rate | 4.2% | 4% |
| GBP | Consumer Confidence | -42 | -45 |
| USA | Core PCE | 0.4% | 0.3% |
The content of this Market Commentary is provided for general information only. It is not intended to amount to advice on which you should rely. In particular, neither this Market Commentary nor any other content of our website should be construed as investment advice. The information contained in this Market Commentary is not, and should not be read as, an offer, recommendation or inducement to engage in investment activity. In no event shall we be liable for any damages resulting from reliance on or use of any information contained in this Market Commentary. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this Market Commentary.
Although we make reasonable efforts to ensure that that the information in this Market Commentary is accurate as at the date on which it is published, we make no representations, warranties or guarantees, whether express or implied, that it is accurate, complete or up to date.