January 18, 2022

“Cable extended its sustained rally to a new five-week high, despite softer than expected UK inflation figures this morning. Data showed the UK Consumer Price Index eased to 10.5 per cent year-on year, in contrast to 10.6 per cent anticipated. The BoE’s rate-hiking bias earlier in the week could be the reason behind this upside move. All eyes are on US retails sales and US PPI data later today.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Donald Trump has issued a warning to Ron DeSantis if the Florida Governor decides to run against him in the 2024 presidential race. The former president also continued to sound off on his Truth Social platform on Monday about the parallel investigations into the discovery of a large trove classified materials at his Mar-a-Lago home and the discovery of a small number of classified documents from President Joe Biden’s time as vice president at his home and an office he once used. Meanwhile, former New York City mayor Rudy Giuliani has spoken out to reveal that Mr Trump once advised him to take secret documents home with him.

Jeremy Hunt is planning a “slimmed down” spring budget with no immediate tax cuts as the Conservatives press ahead with attempts to win back economic credibility after the damage inflicted by the Truss administration. Treasury insiders said the chancellor was not expected to announce any tax cuts in his fiscal statement this March as his focus was wholly on getting the economy back on a steady footing and the public finances were tight. They said that boosting growth, bringing down inflation and reducing national debt were the government’s top priorities as it seeks to restore confidence among business and the public, and only then could taxes be reduced.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. UK inflation eased on the month, in line with economists’ expectations, as fuel, clothing and recreational costs dragged down the index. Inflation softened to 10.5% in December, down from the 10.7% of November, the British Office for National Statistics said this morning. The core CPI, which excludes food, energy, alcohol and tobacco, was steady on the month at 6.3% in December, the ONS found. The agency said the largest downward contribution came from the transport, clothing and recreation sectors, offsetting hikes in housing and household services, food and non-alcoholic beverages.

EUR

Euro is well bid against most major currencies overnight. The European Union is ramping up its preparedness for possible chemical and nuclear emergencies as Russia’s invasion of Ukraine nears the one-year mark with a stockpile of items to be set up in Finland, it was announced yesterday. A total of €242 million has been allocated to Finland by the European Commission to create the bloc’s first strategic reserve against chemical, radiological and nuclear (CBRN) threats for use by all member states. “Russia’s war of aggression against Ukraine has confirmed the need to strengthen EU CBRN preparedness,” Janez Lenarcic, European Commissioner for Crisis Management, said.

USD

The dollar is weaker than most major currencies in the early morning trade. Wall Street is bracing for an impending fight on Capitol Hill over the federal debt limit, raising fears a showdown could send the already fragile US economy into a recession. Treasury Secretary Janet Yellen warned last week the US will hit its statutory debt limit and that unless Congress takes swift action, the government may not be able to pay its bills as early as June. The Treasury Department will begin deploying “extraordinary measures” this week to prevent the US from defaulting on its obligations. The emergency moves should give Congress until at least early June to raise or suspend the country’s current $31.4 trillion borrowing limit.

Markets

European markets were mixed this morning as uncertainty persisted on the economic outlook, a topic high on the agenda at the World Economic Forum in Davos this week. The pan-European Stoxx 600 index was fractionally higher in early trade. Travel and leisure stocks added 1.1% while chemicals dropped 0.6%. Elsewhere overnight, Asia-Pacific shares traded mostly higher even as the Bank of Japan announced no change to its yield curve control policy, while US stock futures were slightly higher this morning.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: UK Dec. CPI
9:00 a.m.: South Africa Dec. CPI
10:15 a.m.: ECB’s Villeroy speaks at Davos
10:30 a.m.: UK Nov. House Price Index
11:00 a.m.: Euro-Area Dec. CPI
1:15 p.m.: ECB’s Villeroy speaks at Davos
2:30 p.m.: US Dec. PPI, Retail Sales
3:15 p.m.: US Dec. Industrial Production
4:00 p.m.: US Jan. NAHB Housing Market Index
Fed releases Beige Book

Corporate Events

Earnings include Prologis, EQT, Schwab, PNC Financial, Discover Financial, First Horizon, Kinder Morgan and Alcoa

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.