Early Morning Call: inflation data puts pressure on BoE - 25bp or more?

UK inflation

UK inflation data published on Wednesday has put more pressure on the Bank of England, which is widely expected to raise rates. There are three reasons the country is in this position: the government's response to Covid, the Russian invasion of Ukraine, and the UK’s economic performance, which created jobs at a record pace and pushed up wages.

Fed decision

When asked on Wednesday to comment on the Federal Reserve's (Fed) decision to keep rates steady last week, Jerome Powell said: "We didn't use the word pause, and I wouldn't use it here today. Inflation has moderated somewhat since the middle of last year. Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go."

The Fed chair (Jerome Powell) added that a majority of policymakers see two more quarter-point rate increases as likely by the end of the year. But, despite the consensus on lowering inflation, opinions start to diverge about the need for and timing of additional interest rate increases. Atlanta Fed President Raphael Bostic now suggests the Fed would need to wait at least past its July meeting to decide on further rate increases.

Macroeconomic indicators

The market will also be attentive to the release of some macroeconomic indicators, including initial jobless claims and existing home sales in the US and consumer confidence in the eurozone, which are forecast to marginally rise to -17 in June from -17.4 the previous month.

Oil overview

Oil prices are holding most of Wednesday's gains, supported by a surprise drop in crude oil stocks. Crude inventories fell by about 1.2 million barrels last week. Gasoline inventories rose by about 2.9 million, while distillate inventories fell by about 300,000.

Crypto overview

There has been a lot of volatility in the crypto world recently. SEC lawsuits against Binance and Coinbase have triggered a fall across the cryptocurrency world.

Last week, Bitcoin hit a three-month low. Since then, it has jumped more than 20% on news that BlackRock was filing for a spot Bitcoin ETF.

Coinbase, an all-session stock on the IG platform, followed a very similar path, recording two days of heavy losses earlier this month before rising about 15% since last week's low.