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On August 13th, Goldman Sachs analyst Robert Kaplan stated that the Federal Reserves decision not to raise interest rates in July was "absolutely" correct, and urged policymakers to remain open-minded until September, arguing that the factors influencing inflation are complex and that rigid forward guidance would be counterproductive. Kaplan stated, "If I see meaningful improvement, I might be willing to continue holding rates steady, but I want to make full use of every opportunity before September to make judgments, avoiding rigidity or preconceived notions." Kaplan believes current forces include: inflationary pressures from the development of artificial intelligence, tariffs, labor constraints, and soaring oil prices; meanwhile, AI applications are having the opposite effect, accelerating the downward trend in inflation. He suggested that Warsh should use his speech at this months Jackson Hole symposium to briefly explain the reasons for the Feds decision to hold rates steady in July, rather than giving a purely "philosophical" speech. Kaplan stated that his concerns about long-term US Treasury bonds outweigh his concerns about the federal funds rate itself. He stated that the global rise in long-term Treasury yields reflects a structural supply-demand imbalance driven by persistently large fiscal deficits, rather than Fed policy.An explosion occurred at a military factory near Rome, the Italian capital, on the 13th, according to Italian authorities. No casualties have been reported so far.The UK Maritime Trade Organization reports that the Iranian Revolutionary Guard continues to harass and monitor merchant ships, although no attacks were confirmed in the latest reporting period.Sources say Ukraines proposal was conveyed to Russia through a third party, but no response has been received yet.Bank of England Chief Economist Peel: UK economic growth provides a reason to raise interest rates.

GBP/USD aims to retake 1.2300 amid an upbeat market sentiment, with US/UK Inflation in the spotlight

Daniel Rogers

Dec 13, 2022 15:11

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After dipping as low as 1.2260 during the Tokyo session, GBP/USD demand has increased. The Cable is attempting to reclaim the round-level resistance of 1.2300 as investors' risk appetite has risen significantly ahead of the release of U.S. inflation data.

 

The US Dollar index (DXY) has fallen below the round-level support of 105.00 as investors' pre-US inflation jitters have dissipated. S&P500 futures are maintaining their gains from Monday due to expectations of a drop in inflationary pressures. The anticipated change in the Federal Reserve's (Fed) interest rate policy has reinforced optimism on a broader scale.

 

The street anticipates a reduction in the US Consumer Price Index (CPI), driven by a decline in gasoline costs and consumer-inflation estimates for one year. The Federal Reserve Bank of New York's monthly Survey of Consumer Forecasts reported on Monday that US consumers' one-year inflation expectations decreased to 5.2% in November from 5.9% in October, the greatest one-month reduction on record. Inflation expectations have consequently decreased to 7.3% for headline inflation and to 6.0% for core inflation.

 

On the British Pound front, investors anticipate the release of the United Kingdom Employment and CPI numbers on Tuesday and Wednesday, respectively. The quarterly Unemployment Rate (October) is anticipated to be 3.7%, up from the previously reported 3.6%. Aside from this, the statistics on Average Earnings is the most relevant aspect. Quarterly Average Earnings without Bonuses were anticipated to increase by 5.9% compared to the preceding announcement of 5.7%.

 

While it is anticipated that the headline rate of inflation in the United Kingdom would decline to 10.9% from 11.1%, as previously reported. As a result of the food supply issue, labor shortages, and growing input costs, food price inflation has soared. Investors should not overlook the possibility of an unforeseen inflation spike.

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