Highlights

The British public’s expectations for the rate of inflation a year ahead have risen to their highest since 1999, according to a quarterly survey by the Bank of England. The public’s median 12-month inflation expectation rose to 4.6% in May from 4.3% in the February survey. Two- and five-year expectations rose to 3.4% and 3.5%, the highest since 2013 and 2019 respectively.

Credit growth in China accelerated in May, after the central bank relied on the country’s commercial banks to do more to support an economy suffering from COVID-19-related lockdowns and a terrible real estate crisis. The People’s Bank of China said total social finance rose by 2.79 trillion yuan after falling to just 910 billion yuan a month earlier, when major financial hub Shanghai joined the list of regions and counties. cities subject to COVID-19 lockdown measures.

Japanese imports probably jumped in May at the fastest pace in six months, supported by soaring commodity prices and the yen’s decline to its lowest level in two decades, according to a Reuters poll released on Friday. Rising import costs are inflicting increasing hardship on Japanese households and domestically-focused businesses, raising questions about the central bank’s stance that a weak yen is good for the whole economy. economy.

USD/INR movement

USDINR widened at the open at 77.7900 and traded in the 77.7850-77.8700 range. The pair closed the day at 77.8325 levels. USDINR rose and touched lifetime highs today amid general dollar strength. High crude oil prices, FII outflows and surging US yields also kept the Indian rupee under pressure. National industrial production rose 7.1% in April on the back of better performance in the energy and mining sectors, according to government data released today.

Global Currency Updates

The annual rate of inflation in the United States reached 8.6% in May according to the latest consumer price index data released by the United States Bureau of Labor Statistics. The inflation print was above the expected reading of 8.3%. The dollar index remained strong and rose above 104 levels after the release of higher than expected inflation. The effect of the general dollar strengthening was seen in both currencies as the euro and the pound weakened and traded at the 1.0524 and 1.2385 levels respectively.

Bond market

Short-term US Treasury yields jumped today after the release of higher-than-expected inflation data. The 2-year rate jumped more than 8 basis points to trade above 2.9%. The benchmark 10-year Treasury yield rose briefly and traded at 3.05%. Short-term rates moved more due to their greater sensitivity to Federal Reserve rate hikes. India’s benchmark 10-year bond yield also closed higher at 7.519%.

Stock market

India’s benchmark Sensex and Nifty 50 stocks suffered steep losses after a weak start as the ECB’s rate hike forecasts and upcoming US inflation data confused investors around the world. Losses across all sectors dragged major indices lower, with financials, IT and metals stocks being the main drags. The broader markets also bore the brunt of overall Street weakness. The Nifty Midcap 100 and Nifty Smallcap 100 indices fell around 1% each.

evening sun

“The focus should be on the speech by ECB President Lagarde, expected later today.”

European stocks fell further as investors reacted to the European Central Bank’s latest policy decisions and stronger-than-expected US inflation. US stock futures fell after new data showed inflation accelerated in May. Higher inflation is likely to put pressure on the Fed to raise interest rates quickly to temper rising prices. Fed officials are largely expected to raise the central bank’s policy rate by half a percentage point next week and replicate it in July. The focus will be on the speech by ECB President Lagarde, expected later today.