US Inflation, Weaker Growth in UK Weigh on Sentiment

April 12, 2022 09:38

US inflation data and weaker GDP growth in the UK weighed on market sentiment at the beginning of the week. UK growth for February came in at an anemic 0.1 percent amid concerns over stagflation in the world’s sixth-largest economy.  

Inflation and GDP benchmarks represent the two biggest economic challenges facing investors in the second quarter.  

US inflation for March 

In the world’s largest economy, the US Federal Reserve has signaled a hawkish stance on interest rate policy for the rest of the year on the back of high US inflation that is well over the target range of 2 percent.  

Inflation numbers for March are set for release later today and may move the USD currency pairs and stocks depending on the results compared to February’s 7.9 percent, a 40-year high. The expectation is that US inflation for March will be in a range of six to eight percent, and any surprises could trigger volatile investor reactions and impacts on asset prices. 

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High crude oil spot prices 

High crude oil spot prices drove fuel and food prices up in February and were the main drivers of inflation in the US and other regions. The upward pressure came from an economic recovery from the COVID-19 downturn and intense supply-side fears when the conflict in Ukraine began on February 24. Crude oil spot prices remained relatively high during the first two weeks of March before retreating towards the end of the month.  

Did the retreating crude oil spot prices reduce inflation in the US during March or will the headline result set another 40-year high? The results later today will shed more light on the economic trend. If inflation stayed as high in March as it was in February, the Federal Reserve would have another reason to hike the key interest rate guidance by 0.5 percent during its meeting in May.  

Eurozone trading news 

In other trading news, the Bank Lending Survey (BLS) for the Eurozone is set for release later today with a possible impact on the EUR. The survey influences the ECB’s monetary policy and comes at a sensitive time for Europe’s economy amid geopolitical events and elections in France. 

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks. 

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.