President Xi called for an “all out” push on infrastructure spending to lift the economy, helping juice commodities. But tight lockdown measures remain a significant headwind for mainland economic momentum. The data calendar is quite light today (US Wholesale Inventories and Pending Home Sales). Markets will likely focus on the European energy situation, whether the rebound in stocks has any legs for direction and month-end flow risks. We remain bullish on the broader trend in the USD and continue to look for gains to extend another 1% or so from current levels (reflecting the measured move rally potential after the break out from the DXY’s March consolidation range) in the near term before a consolidation sets in.
The UK’s cost of living crisis is set to significantly limit UK GDP growth over the coming quarters and No 10’s policies are unlikely to provide much relief. PM Johnson is calling on his ministers to find “innovative ways” to reduce the pressure of higher prices on households. But “solely relying” on existing funding as the government tries to right public finances clearly means the measures will have limited net impact. And with no meaningful measures announced over the coming days, the Conservatives are heading toward a stinging defeat at next week’s local elections. Little price relief also muddies up the BoE’s calculations for the policy outlook, though we think they are likely to respond to depressed growth with a much smaller increase in rates than anticipated by markets; the 1.25 level may be tested over the coming days.
