Today’s Notable Sentiment Shifts
USD – The dollar fell against major currencies on Tuesday after data showed a less-than expected rise in US inflation last month, creating uncertainty about the timing of the Federal Reserve’s tapering of asset purchases.
Commenting on the report, City Index noted that “the softer inflation prints caused investors to push back on bets that the Fed could move sooner to taper bond purchases. Easing inflation would take the heat off the Fed to move prematurely… The evidence does appear to be building that peak inflation has passed. That said, supply chain bottlenecks are expected to persist for a while so it’s unlikely that either PPI or CPI will drop dramatically or rapidly.”
GBP – Sterling hit a new 5-week high against the dollar and a 3-week high to the euro on Tuesday, supported by labour market data that showed the total number of payrolled employees in Britain has climbed to pre-pandemic levels.
Commenting on its implications for the UK’s monetary policy outlook, UBS stated that “what will be interesting from the BoE this month is how they balance the data which has mostly been strong and therefore supportive of what they said last month about rate hikes with the weaker elements such as retail sales… So the BoE may be incrementally more dovish this month because of pressures on consumers. But at the big picture level the BoE will be one of the earlier hikers and that sits well with pound, which is still somewhat undervalued.”
Commenting on the report, City Index noted that “the softer inflation prints caused investors to push back on bets that the Fed could move sooner to taper bond purchases. Easing inflation would take the heat off the Fed to move prematurely… The evidence does appear to be building that peak inflation has passed. That said, supply chain bottlenecks are expected to persist for a while so it’s unlikely that either PPI or CPI will drop dramatically or rapidly.”
GBP – Sterling hit a new 5-week high against the dollar and a 3-week high to the euro on Tuesday, supported by labour market data that showed the total number of payrolled employees in Britain has climbed to pre-pandemic levels.
Commenting on its implications for the UK’s monetary policy outlook, UBS stated that “what will be interesting from the BoE this month is how they balance the data which has mostly been strong and therefore supportive of what they said last month about rate hikes with the weaker elements such as retail sales… So the BoE may be incrementally more dovish this month because of pressures on consumers. But at the big picture level the BoE will be one of the earlier hikers and that sits well with pound, which is still somewhat undervalued.”