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On September 2nd, Thorsten Slok, chief economist at Apollo Global Management, stated that US Treasury yields may rise further due to the Iran war and tariffs, but this upward pressure is largely unrelated to the US fiscal situation. Slok said, "In fact, the market is less concerned about US policymaking than it is about Japan and Germany." Global government borrowing costs continue to soar as investors demand greater compensation to entice them to hold longer-term bonds. Despite US Treasury Secretary Bessenters announcement of Treasury buybacks in an attempt to curb long-term yields, US Treasury yields have rebounded. The market currently expects a 69% probability of a rate hike at the Federal Reserves next policy meeting in mid-September. Economic pressures are also transmitting to the housing market and the auto industry, both highly sensitive to rising yields. Slok stated, "Interest rates are restrictive for the housing market, but not for artificial intelligence."U.S. Treasury Secretary Bessenter: The Canada trade agreement has had little impact on U.S. prices.U.S. Treasury Secretary Bessenter: Chevrons CEO has performed exceptionally well in managing assets in Venezuela.U.S. Energy Secretary Wright: More than 17 million barrels of oil passed through the Strait of Hormuz on Monday.September 2nd - British Prime Minister Andy Burnham pledged that his government would ensure fiscal stability but refused to rule out further borrowing. At the same time, he attempted to blame the UKs high national debt on the previous Conservative government. During his first Prime Ministers Questions since taking office on Wednesday, Burnham stated, "This is a government based on fiscal responsibility. We will abide by the fiscal rules." In response to Conservative opposition leader Kemi Badenochs questioning about soaring UK bond yields leading to higher government financing costs, he said, "The turmoil in global markets is due to the exposure they left behind. During her government, the debt-to-GDP ratio was consistently rising."

The EUR/GBP is fluctuating close to 0.8750 as focus shifts to UK inflation and BoE policy

Alina Haynes

Mar 20, 2023 13:22

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The EUR/GBP pair is exhibiting a lackluster performance around 0.8750 during the Asian session. As investors prepare for the release of the Bank of England's (BOE) interest rate decision and the United Kingdom's Consumer Price Index (CPI) this week, the cross has moved sideways.

 

Despite the fact that the headline asserts that UBS has revitalized Credit Suisse, the cross appears to be weak. Credit Suisse shareholders will receive one share of UBS for every 22.48 Credit Suisse shares they own, valuing the bank at $3.15 billion (£2.6 billion), according to BBC News. The Swiss National Bank (SNB) stated that the agreement was the most effective means of restoring market confidence and mitigating economic risks. Additionally, the BoE endorsed the "comprehensive set of actions."

 

The consensus opinion on the street is that Governor Andrew Bailey of the Bank of England (BoE) will provide a pessimistic outlook for the interest rate decision amidst concerns of banking turmoil, which will be his top priority.

 

Rabobank analysts also anticipate a 25 basis point (bps) rate hike and caution that the market has not fully factored in this scenario. Andrew Bailey, governor of the Bank of England, would raise rates by 25 basis points to 4.25 percent.

 

Prior to that, the UK inflation data released on Wednesday will be attentively monitored. The annual headline CPI is expected to decline from 10.1% to 9.8%, according to projections. At 5.8%, the core CPI, which excludes the cost of fuels and food, would not change. It should be aware that persistent inflation in the United Kingdom is due to rising food prices and a labor shortage.

 

After the European Central Bank (ECB) raised interest rates by 50 basis points (bps) last week, Gediminas imkus, a member of the ECB Governing Council, stated on Friday that "the terminal rate has not yet been reached" For further deflation, extremely persistent inflation in the Eurozone requires higher interest rates.


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