Markets Expect BoE Rate Hike

US inflation data released yesterday showed a surprise fall in the annualized rate to 4.9%, a ninth consecutive monthly annualized decline.

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1. The Bank of England will be meeting today to deliver its Monetary Policy Report and Official Rate. The Bank is expected to hike rates by 0.25% from 4.25% to 4.50%.
2. US CPI (inflation) data released yesterday showed the annualized rate unexpectedly decreased sightly last month, reaching a low of 4.9% when an unchanged reading of 5.0% was widely expected. Despite this decline, core CPI rose by 0.4% month-on-month when a rise of only 0.3% had been expected. The data triggered a rally in stocks and other risky assets, despite the rise in the core rate and comments by the Fed’s Barkin who stated that inflation remained unacceptably high and that not enough progress was being made in bringing it down towards the Fed’s 2% target.
3. Chinese CPI data showed that prices increased by only 0.1% last month, the lowest monthly increase seen in approximately 3 years. This has added to sentiment that global inflation is coming down decisively.
4. In the Forex market, the US Dollar did not react strongly to yesterday’s CPI data release. The Asian session has been fairly quiet, with little directional price movement, seeing greatest strength in the New Zealand Dollar and the greatest weakness in the Swiss Franc. The long-term bearish trend in the US Dollar remains valid, and trend traders may also be looking for long trades in the EUR/USD and GBP/USD currency pairs, especially the latter which rose to reach a new long-term high yesterday at $1.2680.
5. Stock markets are mostly bullish, with the NASDAQ 100 Index notably reaching its highest price seen since August 2022.
6. Precious metals are performing strongly within a slow bullish trend after Gold reached a high price just below its all-time high of $2,070 last week.
7. Some soft commodities have been breaking to new highs and trending strongly, notably the Sugar ETF Cane which ended the week with a strong rebound, and the Cocoa ETF NIB, which closed yesterday at a multi-year high price.
8. There will be a release of US PPI data later today, which will be scrutinized for clues regarding inflationary pressures. It is expected to show a month-on-month increase of 0.3%.