- The US dollar posted gains yesterday with the dollar index rallying after the release of the Philadelphia Fed Business Outlook, which rose to its highest level in two years. Markets remain cautious of the notoriously volatile series, but the greenback gained with the survey coming in at 15.5 against the previous 3.2 and expectations of 2.0. Weekly initial claims also beat estimates suggesting a labor market that is moderating with a low level of layoffs.
- The recent tone of Fedspeak continued yesterday with Atlanta Fed President Raphael Bostic saying that he is comfortable keeping interest rates steady, reiterating that he doesn’t think it will be appropriate to reduce rates until towards the end of the year. “Inflation is high – it’s too high – and we need to get it to our 2% target” he said, adding, “I’m comfortable being patient.” His comments back up recent central bank officials, including Chairman Powell, who earlier this week said that persistent inflation means it will likely take longer than previously thought to gain enough confidence to lower borrowing costs. The market continues to price just one to two cuts from the FOMC in 2024 – a considerable shift from the six to seven cuts expected at the start of the year.
- UK Retail Sales data released this morning disappointingly stalled in March, with consumers scaling back on purchases, providing further evidence of a lackluster recovery from last year’s recession. Ongoing high inflation triggered a fall in food sales and high prices recorded on the High Street kept shoppers away as consumers struggle to recover from a cost-of-living crisis. Lower inflation and interest rate cuts are on the horizon, but consumers are yet to feel these effects in their household finances.
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