Daily Alert – Wednesday 24th May 2023: Fears for UK economy as CPI comes in hot

Mark NugentDaily Alert, May 2023

Daily Alert – Wednesday 24th May 2023: Fears for UK economy as CPI comes in hot

Good afternoon.

Stubborn UK inflation is top of today’s news. CPI for April came in at 8.7% against an expectation of 8.2%. We would expect this to increase the likelihood of Bank of England rate hikes, and this would depress the FTSE100. This is indeed what is happening. In addition, we would expect the GBP to rise on those rate hike expectations. The GBP is in fact falling, as the markets are now fearful that the necessary hikes will damage the UK economy.

Elsewhere, we see the Reserve Bank of New Zealand hiking by 25 basis points to 5.5% as expected, and now indicating that the peak has been reached, so no more hikes. That caught the markets by surprise and the NZD is falling. This is a potential reversal opportunity.

Most of the major pairings between USD, EUR, JPY and GBP are all sitting nicely on major support or resistance. We also have established trends in three of the four pairs. This should lead to some nice trading opportunities. Keep your eyes open.

Later today we have the Fed’s FOMC Meeting Minutes.

I’ll be back tomorrow.

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