Inflation, Inflation, Inflation!
Rising inflation continues to dominate the headlines. Inflation figures are expected to rise over 10%, and Bank of England Chief Economist – Huw Pill commented that the UK’s Central Bank faced its most difficult challenge in 25 years, although he also commented that monetary policy tightening still had a long way to go.
Despite that, GBP started the week at month highs vs USD/EUR. Better than expected Retail Sales figures, has led to a more positive tone about the economy, and therefore, the belief the BOE could have more scope for increasing rates than previously thought.
ECB’s President Christine Lagard announced on Monday morning that July is the likely start date for ECB rate hikes. The Euro climbed during early trading off the back of these comments. Recent concerns by ECB officials around Euro stability have added to EUR strength because a weaker Euro can exacerbate the already rampant inflation.
Sentiment change over further dollar gains from rising US interest rates led to end-of-week profit-taking. This continued into Monday as the dollar slipped further, as investors kept up-selling pressure.
China’s lockdown easing has also supported a move away from the safe-haven currency. The market views this as a chance to sell the dollar on hopes that loosening lockdowns in China could help global growth.