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GBP

Markets Reset to Pre-Inflation Release Levels 

Yesterday’s inflation data failed to make a persuasive case for imminent rate cuts. Growth in both the headline and core consumer price measures declined more slowly than economists had hoped, and services ex-shelter inflation remained sticky, suggesting that the disinflation process could prove unexpectedly turbulent. But markets are back to betting on rapid monetary easing. After a brief post-release bump, ten-year yields are back below the 4 percent threshold, Fed fund futures are discounting five or more cuts by the end of 2024, and odds on a 25-basis point move at the central bank’s March meeting are holding near 70...

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US CPI surprise

• US CPI. Data slightly higher than forecast. This triggered a bout of market volatility. After an initial jump in yields & the USD, & drop in equities, markets reversed.• Glass half full. US yields fell as some underlying inflation trends still support the outlook for eventual Fed policy easing, though a move in March looks too soon.• AUD vol. Further bouts of AUD volatility likely given where we are in the cycle. Since the float the AUD has, on average, traded in a ~13cent range each year. Markets endured a burst of volatility overnight in the wake of the...

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Waiting on the US CPI

• Mixed markets. US equities rebounded & bond yields ticked up. Oil prices dipped. In FX, there were generally limited net moves. AUD near $0.67.• AU inflation. Headline inflation decelerated more than expected. But things are still a long way from target. RBA to lag its peers when rate cuts come through.• US CPI. December inflation data released tonight. Headline inflation forecast to nudge up, but core CPI predicted to slow. The data can generate USD volatility. Ahead of the US CPI release markets put in a mixed performance overnight. On the one side, equities bounced back with a tech...

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Risk sentiment turns

• Market jitters. European/US equities gave back some ground, as did industrial metals. Global growth concerns also gave the USD a bit of a boost.• AUD underperforms. The global backdrop more than counteracted the positive Australia economic data. Black Friday helped retail sales exceed expectations.• AU inflation. The monthly CPI indicator is released today. Headline CPI is forecast to slow, but the RBA is more focused on core & services inflation. Risk sentiment soured a bit overnight. European and US equities gave back some of the gains from a day earlier (EuroStoxx50 -0.4% and US S&P500 -0.2%), US bond yields...

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Fed Pivot Hopes Stabilize, Leaving Currencies Unmoved

Equity markets are down ahead of the North American open after midair blowout on an Alaska Airlines flight hammered Boeing shares and lent new meaning to the term “window seat” – but risk appetite in other asset classes has been left largely unaffected. Fixed income and currency markets are relatively stable, with the dollar retreating only modestly from its early-year highs. Friday’s session was full of sound and fury, signifying nothing. Treasury yields and the dollar rallied when data was released showing US job creation and wage gains accelerating in December, but the move faded as traders parsed the details,...

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