NZD resilient, pushing back above US$0.62 on heels of weaker USD

Key Movers

UK Inflation printed higher than anticipated on Wednesday, with both headline and core CPI printing above consensus expectations. Core inflation surged through 7% marking a 31-year high at 7.1%, all but ensuring the Bank of England will need to maintain tighter monetary policy for longer. Having issued 12 consecutive rate hikes, we fully expect the Monetary Policy Committee (MPC) will deliver a 13^th hike when they meet this evening. With the peak fund rate now expected to reach 6%, UK gilt yields continued their push higher. The British Pound was unable to maintain its recent upward momentum, sliding below 1.27 following the data drop amid elevated concerns higher interest rates and sustained inflation will create a cycle of stagflation, weighing on growth. Despite Sterling's selling pressure, the US dollar was broadly weaker following commentary from Fed Chair Jerome Powell. Powell delivered his semi-annual congressional address where he suggested policymakers expect to need to move rates higher restricting growth. With focus now shifting away from yields toward the restrictive impact of higher interest rates the USD has come under increased scrutiny. Amid a backdrop of a weaker US dollar, the Euro punched back through 1.10 while the Yen faltered as global rates surged higher.

Our attentions turn now to the Bank of England Policy Meeting, US jobless claims data and more Fed commentary.