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July 22nd - Data released by the UK Office for National Statistics on Wednesday showed that consumer prices rose 2.6% in the 12 months to June, down from 2.8% in the previous month. This is the lowest inflation rate since March last year and is also lower than the average economist forecast of 2.7%. Expectations of an end to the Iraq War led to a sharp drop in crude oil prices, which in turn drove down petrol and diesel prices last month. Food and non-alcoholic beverage prices also contributed to the overall price decline. The services inflation rate, a key indicator of domestic inflation pressure closely monitored by the Bank of England, slowed to 3.6% from 3.7%, slightly higher than expected. However, the respite for consumers from the decline in inflation may only be temporary. Economists expect a 13% increase in the ceiling for UK household energy bills in July, resulting in a slight rebound in the inflation rate. The market widely expects the Bank of England to keep interest rates unchanged next week, as it needs to balance the threat of rising energy prices with a weak labor market and sluggish economic growth.According to Irans Fars News Agency, an official in Irans Bushehr province said that two explosions occurred in the province this morning due to a US attack.On July 22, it was reported that former Venezuelan President Nicolás Maduro, along with prosecutors from the U.S. Department of Justice, jointly proposed to the court on Tuesday that the trial for the charges against Maduro be scheduled for June 2027. The two sides submitted a joint document ahead of a hearing in Manhattan federal court on Wednesday, outlining a timetable for the subsequent trial in one of the most high-profile and impactful criminal cases in the United States in recent years. However, the U.S. District Judge Alvin Hellerstein, who is presiding over the case, will ultimately decide the schedule, and both sides indicated that they may request adjustments to the timetable in the future. According to the submitted timetable, Maduros first legal motion to dismiss the charges must be filed by September 2, which is expected to include a motion citing the immunity of a head of state. After the prosecution transfers any classified evidence to the defense for review, Maduro will file a second legal motion by January 11 next year.Data from the UK National Grid shows that the Hisham 1-2 nuclear reactors have been restored to grid operation after being shut down.The UKs core CPI rose 0.3% month-on-month in June, below the expected 0.2% and the previous reading of 0.3%.

GBP/USD seeks to regain 1.2300 as higher UK CPI strengthens the case for a rate hike by the Bank of England and the USD retreats

Alina Haynes

Mar 23, 2023 15:00

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During the Asian session, the GBP/USD pair attempts to reclaim the resistance level at 1.2300. Following a vertical correction, the Cable has recovered to near 1.2260 as the market anticipates that the absence of hawkish interest rate guidance from Federal Reserve (Fed) chair Jerome Powell while addressing the economy at the monetary policy meeting indicates that the Fed is close to ending its policy-tightening spell.

 

S&P500 futures have generated some gains in the Asian session following a decline on Wednesday as a result of Fed Powell's confirmation that the fight against intractable U.S. inflation will continue. Chairman of the Federal Reserve Jerome Powell has ruled out rate cuts in 2023, citing the difficulty of controlling inflation. In addition, US Treasury Secretary Janet Yellen's statement that the government "does not plan to insure all uninsured bank deposits" heightened fears of a banking sector collapse.

 

Following a recovery move, the US Dollar Index (DXY) has retreated on expectations that additional credit tightening to protect banking institutions will reduce overall demand, economic activity, and inflation. In the interim, the demand for US government bonds has increased as a result of expectations that US Janet Yellen will end further policy restrictions and reduce support for all bank deposits.

 

On the front of the United Kingdom, the Pound Sterling is likely to maintain its strength as the Bank of England (BoE) is scheduled to raise rates for the eleventh consecutive time. Governor Andrew Bailey of the Bank of England is expected to raise interest rates by 25 basis points (bp) in response to rising food and non-alcoholic beverage prices, as well as rising energy costs, which have contributed to inflation in the United Kingdom.

 

In the midst of global banking turmoil, the Bank of England's (BoE) interest rate decision will be difficult, as policymakers were divided over whether to raise rates further or maintain them at their present level.


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