Update -

Treasury Market Commentary

Published

8th October 2021

Category

Macro Commentary

UK inflation expectations have hit a 13-year high, with the market increasing bets that the Bank of England will raise interest rates to 0.75% by the end of next year. UK yields continue to rise accordingly.

Huge economic challenges lie ahead, particularly surging energy costs and ongoing supply and labour shortages. The jobs market will be critical, and how it reacts now furlough has ended.

The real concern is we get a period of stagflation, with inflation remaining stubbornly above target whilst growth begins to slow.

The US central bank remains on course to begin tapering its QE program next month as the economy continues to recover very strongly.  

Whilst in Europe, the ECB continues to reiterate that rising inflation will be transitory, with interest rates likely to remain negative until at least 2023.

On the exchanges, volatility remains extremely high, with sterling recovering strongly from its recent lows, and the Euro coming under further selling pressure.

GBP/USD is back above 1.3600 having hit year-to-date lows of 1.3400 just last week, and GBP/EUR is back towards its year-to-date highs of 1.1800.

Today’s focus is very much on the critical US jobs data due at 1.30pm.

GBP/EUR – 1-year chart

Week Ahead

Date

Release

Last

Expected*

12/10/21

UK Average Weekly Earns. 3M/YoY

8.3%

n/a

12/10/21

UK Unemployment Rate

4.6%

n/a

13/10/21

UK Industrial Prod. YoY

3.8%

n/a

13/10/21

UK Manufacturing Prod. YoY

6.0%

n/a

13/10/21

UK Construction Output YoY

8.6%

n/a

*Bloomberg survey / Not available

 

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.1550

USD/JPY

111.95

GBP/USD

1.3580

 

AUD/USD

0.7295

 

GBP/EUR

1.1770

GBP/AED

4.9960

USD/CHF

0.9300

XAU/USD

1756

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7083

+9.65%

S&P

4399

+17.76%

EUROSTOXX

4095

+15.28%

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.08675%

2 year

+0.61%

12 month

0.41475%

5 year

+0.84%

View Arbuthnot Latham’s Private and Commercial deposit rates.

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