UK Inflation Offers Hope for the Bank of England

It's been a long time coming but inflation in the UK is finally on the decline and in a rare show of good news, it's falling at a faster pace than expected on both the headline and core levels.

Sterling Takes a Tumble as Inflation Falls

The British pound is sharply lower on Wednesday. In the European session, GBP/USD is trading at 1.2916, down 0.92%. The pound’s fall was driven by Wednesday’s UK inflation report, which showed that CPI fell to 7.9% in June, down from 8.7% in May. This marked the lowest inflation level since February 2022. The decline was driven by lower prices for food and motor fuel. Core CPI declined slightly, from 7.1% to 6.9%.

Sunset Market Commentary

In the absence of any EMU data with market moving potential, the UK enjoyed the prerogative to set the tone at the start of trading this morning. After four consecutive (mostly substantial) upward surprises, UK June CPI inflation finally came out slightly softer than expected.

AUD/USD Extends Slide, Aussie Employment Report Next

For anyone who enjoys strong volatility, look no further than the Australian dollar. Last week, AUD/USD climbed 2.18%, as the US dollar sagged badly after the June inflation report surprised on the downside. The Australian dollar hasn’t been able to consolidate and has pared about half of those gains this week.

Australia June Labour Force: Showing Few Signs of Letting Up

In June, employment gained 32.6k, or 0.2%, slightly higher than Westpac’s forecast for a +25k lift, but well above the market median forecast for a more modest +15k increase. Over the first half of 2023 the pace of employment growth has held up to a remarkable degree, the three-month average change still above +40k/mth. This is much higher than the pace seen over the second half of 2022 (+26k/mth), and almost exactly on par with the pace seen over last year as a whole (+42k).

Tesla, Netflix Down Post Earnings

Nasdaq futures are down this morning, by about 0.50% at the time of writing, after the afterhours trading session was shaken by results from two US tech giants: Tesla and Netflix. For both there was good and less good news.

FTSE 100 Bounces Back on UK Inflation News

Participants in financial markets were closely watching yesterday the data on inflation in the UK, where it is at the highest level among the G7 countries. The news turned out to be positive:

Japanese Yen Edges Up Ahead of Japanese Inflation Report

Japan releases National Core CPI for June on Friday. The inflation indicator, which excludes fresh food, is expected to tick upwards to 3.3%, up from 3.2% in May. The “core-core” index, which excludes fresh food and energy and is closely watched by the Bank of Japan, is projected to dip to 4.2%, down from 4.3%.

Sunset Market Commentary

Disappointing earnings from tech giants Netflix and Tesla in US after-market hours yesterday to some extent dampened the equity mood in Europe too. The EuroStoxx50 slid 0.5% at the open but soon recovered to trade 0.1% in green currently.

Broad Growth of the Crypto Market

Crypto market capitalisation reached 1.218 trillion, up 1.1% in the last 24 hours. Altcoins are growing across the board. Although the momentum is far from euphoric, it is more like interest in the market. And this is particularly attractive as equity indices have lost ground over the past 24 hours.