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Asian stocks surged on Monday, boosted by strong earnings reports from major U.S. tech companies and comments from President Trump that the U.S. would begin guiding some neutral ships stranded in the Persian Gulf through the Strait of Hormuz. The MSCI Asia Pacific Index, excluding Japan, rose as much as 2.7%, a record high. Benchmark indices in South Korea and Taiwan, both dominated by tech stocks, soared by more than 3.5%. SK Hynix shares jumped nearly 10%, and TSMC shares jumped over 6%. Dilin Wu, research strategist at Pepperstone Group, said the current strength in markets like South Korea is due to AI-driven trading or speculation. She said she is “cautiously optimistic about Asian markets overall” because geopolitical uncertainty and high oil prices could constrain stock markets.On May 4th, Ryoo Sangdai, Senior Deputy Governor of the Bank of Korea, stated that its time to consider raising interest rates, as economic growth seems unlikely to fall significantly short of the central banks earlier forecasts, while inflation may exceed previous expectations. Ryoo, who is also a member of the Bank of Koreas Monetary Policy Committee, cited the stronger-than-expected economic resilience following the outbreak of the Middle East conflict and the rising inflationary pressures. The Bank of Korea has kept its benchmark policy rate unchanged since July of last year. In February, the Bank of Korea projected 2% economic growth and 2.2% inflation for the year. While policymakers initially expected the unrest in Iran to drag down economic growth and push up prices, recent data shows that the growth outlook has not deteriorated as feared due to strong semiconductor shipments, while inflation risks have increased. Regarding the won exchange rate, Ryoo stated that from an economic fundamentals perspective, the won remains weaker than in the past, although the market does not seem to see the current level as a major problem. The won recently hit its lowest level against the US dollar since the global financial crisis. Speaking about concerns about the economys reliance on semiconductors, Ryoo stated that the key risk lies in whether the cycle shifts or whether the spillover effects are lower than expected, rather than the industrys increasing share itself.U.S. Navy Secretary: Mr. President, your U.S. Navy and U.S. Marine Corps are ready—any place at sea, any time.Trump will attend a small business summit at 3 p.m. ET on Monday (3 a.m. Tuesday Beijing time).ANZ Bank: The global oil market supply-demand gap is projected to be 1.6 million barrels per day in 2026.

GBP/USD falls to around 1.2370 as the BoE considers taking swift action ahead of UK inflation and US purchasing managers' indices

Alina Haynes

Apr 17, 2023 13:53

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On Monday morning, the GBP/USD currency pair retested an intraday low of 1.2390 after extending Sunday's decline from a 10-month high. To provoke adverse after breaking a four-week uptrend, the Cable pair explains the most recent concerns emanating from the United Kingdom (UK) and the optimism surrounding the Federal Reserve (Fed).

 

According to the Financial Times (FT), "The Bank of England is considering a major overhaul of its deposit guarantee scheme, including increasing the amount covered for businesses and compelling banks to pre-fund the system to a greater extent to ensure faster access to cash when a lender collapses."  The revelation fuels banking concerns in the United Kingdom and places pressure on the Cable duo.

 

UK Chancellor Jeremy Hunt's concerns about US subsidies may also be exerting downward pressure on the GBP/USD exchange rate as British firms rush to claim benefits before leaving the country. According to the news, "Chancellor Jeremy Hunt warned Sky News that Britain should be wary of any new subsidies, warning that they could undermine the economy and possibly even spark a protectionist trade war."

 

A larger-than-expected decline in US retail sales was unable to offset positive data from US industrial production and the University of Michigan's (UoM) consumer confidence index from the previous day. Despite this, US retail sales decreased by 1.0% in March compared to the predicted -0.4% decline and February's -0.2% decline. As opposed to the 0.2% market consensus and previous reading, Industrial Production increased by 0.4% in the month in question. The preliminary result of the University of Michigan's (UoM) Consumer Confidence Index for April, which increased to 63.5 from 62.0 analysts' expectations and previous readings, was also encouraging. In addition, inflation forecasts for the next year increased from 3.6% in March to 4.6% in April, while inflation forecasts for the next five years decreased by 2.9% during the same month.

 

Notably, Fed officials have recently appeared more hawkish than their BoE counterparts, which has exerted additional pressure on the GBP/USD exchange rate.

 

In this environment, the S&P 500 Futures exhibit modest gains following Wall Street's pessimistic close, while bond yields remain unchanged following weekly increases.

 

Moving forward, the current week is crucial for GBP/USD speculators as it contains a variety of high-quality inflation, employment, and UK PMI data. These data may be used to support the Bank of England's (BoE) officials' waning hawkish inclination and may keep bears in play. However, the US PMIs and Fed discussions should not be disregarded when looking for clear guidelines.

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