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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Early Morning Call: focus on central banks; watching GBP, USD

EUR/USD holds above parity having hit 1-1 yesterday - watching US CPI today as a possible trading opportunity. NZD/USD little moved as RBNZ raises 50bps; USD/KRW down as BoK raises 50bps; awaiting BoC today.

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Indices outlook

Equity markets in the Asia-Pacific region rose overnight, despite a fall in US indices on Tuesday.

The International Monetary Fund (IMF) says avoiding recession in the US will be "increasingly challenging" as it cut its 2022 US growth forecast for the second time in a month, this time from 2.9% in late June to 2.3%, as recent data showed weakening consumer spending.

Central banks in focus

Two central banks raised interest rates in the last few hours. As expected the Reserve Bank of New Zealand (RBNZ) hiked by 50 basis points (bps) to 2.50%. In its statement the bank said its "Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment."

The Bank of Korea also raised key interest rate to 2.25% from 1.75%. Its governor said a gradual 25bps hike was "desirable" for some time.

This afternoon, it will be the turn of the Bank of Canada (BoC) to decide on rates. Economists see an increase of 75 basis points, which would take the bank's overnight rate to 2.25%.

The BoC began its hiking process a bit later than other central banks but ranks as one of the highest rates in the world's main economies. Up to January this year, the BoC's rate was at 0.25%. A 75bps hike today would mean that 200bps had been added in the past six months.

Economic news

In the UK, monthly GDP unexpectedly rose by 0.5% in May compared to April. Economists expected it to be flat. Industrial production was better than expected, showing an increase of 1.4% in May year-on-year (YoY), against expectations of a 0.3% fall.

US consumer price index (CPI) is due out later today an nmay show an increase in inflation for June. Analysts expect headline inflation to increase to 8.8% year-over-year. That would be a 0.2 percentage point y/y increase from May, taking it to the highest pace since December 1981.

Core inflation, a measure that removes food and energy prices, is seen easing to 5.7% y/y from 6.0%.

Equities

On the corporate front, JD WetherspoonJD Wetherspoon has signaled higher-than-expected losses for the current financial year as labour and fuel costs continue to weigh on its bottom line.

The group, which had said in May its profit would break even this year, now expects to report an annual loss of £30 million.

PageGroup reports a 25.5% rise in second quarter (Q2) gross profit, supported by strong hiring demand from companies amid staff shortages and higher resignations. Quarterly gross profit reached £280.9 million, compared with £219.8 million reported a year earlier.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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