The Day at a Glance | Jul 6 2022

The Top

·     BoE Chief Economist sees no growth for UK economy.

·     Purchase of essential goods drops in the EU due to high inflation.

·     UK Chancellor and Health Secretary resign. Nadhim Zahawi and Steve Barclay will take said roles. 

·     Industrial orders in Germany increased month over month (0.1% vs -0.6%e.).

·     May`s retail sales in the Eurozone increased less than expected (0.2% vs 0.4% m/m).

·     Central Bank of India will carry out measures to increase foreign direct investment. 

·     PMI and employment figures in the US will be made known this afternoon.

·     House prices in Toronto decrease for a fourth consecutive month.

Economic environment

United Kingdom has low expectations of growth. England`s Central Bank`s Chief Economist Huw Pill warned that the British economy would become stagnant in the next 12 months and reiterated his preference for stable interest rate increases. His opinion coincides with the IMF and the OECD`s, who say that the United Kingdom is more susceptible to a recession, along with high, persistent inflation, compared to other Western countries. The BoE`s Monetary Policy Committee considers itself ready to take more aggressive decisions against an 11% expected rate of inflation in 2022. However, Pill considers that strong increases in the reference rate could be counterproductive due to its effects on financial markets and investor sentiment. Since December, the BoE has increased the rate five times and set it at 1.25%. Today, markets believe that there is a 60% likelihood of a 50bp increase, something that hasn’t happened since 1997, despite the loss in momentum and economic growth.