Weekly Digest: U.S., U.K. Inflation, Gold Regains Ground


4 minutes read

Feb 17, 2023

A one-pound coin on top of a five-pound note

18/02/2023: U.S. inflation falls for the 7th consecutive month but comes in ahead of analyst expectations, the Bank of England is likely to hike rates again in March, gold claws its way back. And more.

💡Quote of the week

“When you spread out free money for years at a time, you create a significant drag, and I just don’t see how we are going to avoid a [economy] slowdown… I think the Fed screwed up by allowing 0% interest rates to go on for too long.” Sam Zell, Equity Group Investments founder and chairman

Investment news

eroding US dollar banknote on a black background

🇺🇸 U.S. inflation comes in hotter than expected. Inflation increased in January by 0.5% following a 0.1% increase in December, while the CPI was up 6.4% from the same period in 2022. Both numbers were higher than expected. (CNBC)

The consumer price index, which measures a broad basket of common goods and services, rose 0.5% in January, bringing the annual gain to 6.4%. Economists surveyed by Dow Jones had been expecting respective increases of 0.4% and 6.2%.

🇬🇧 U.K.'s inflation cools. The U.K.'s inflation rate dipped for the third straight month to hit 10.1%, below economists’ expectations. (CNBC)

Reuters polled economists who predicted inflation would drop to 10.3% after dropping to 10.5% in December. The inflation rate has dropped consistently since October when it hit a 41-year high.

🏦 A “cocktail” of sticky inflation and a tight labor market. The Bank of England is likely to hike interest rates again in March due to a tight labor market and a slow return to earth for inflation. (CNBC)

“The cocktail of a tight labor market and inflation failing to cool off quickly will remain a cause of concern for Bank of England policymakers, which may mean the Bank’s aggressive strategy stays in place,” Richard Carter, head of fixed interest research at Quilter Cheviot, said.

🇪🇺 ECB’s preparing for a new rate hike. President Christine Lagarde reiterated that the European Central Bank intends to raise borrowing costs by another half-point in March. (Bloomberg)

“In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde told EU lawmakers in Strasbourg.

Gold claws back some ground. The gold price regained some ground on Thursday as the U.S. dollar pulled back, although prospects of more interest rate hikes by the Fed kept investors worried.

The gold price was up 0.3% at $1,840.86 per ounce, after hitting its lowest level since early January on Wednesday.

“Though the recent positive U.S. economic releases and a firm U.S. dollar continue to put pressure on the safe-haven status of gold, there are chances of a mild technical bounce-back as prices dipped to multi-week lows,” said Hareesh V, head of commodity research at Geojit Financial Services as quoted by Reuters.

🇪🇺 European stocks edge higher. European markets gained after the U.S. inflation data, U.K.`s FTSE 100 topped 8,000 points for the first time. (CNBC)

The pan-European Stoxx 600 index reversed the morning losses and provisionally closed up 0.53% on Wednesday, with most sectors higher. For the first time, the U.K. FTSE 100 broke the 8,000-point barrier and ended the session 0.55% higher.

📸 Image of the week

A meme showing a young guy realizing that inflation is eating away at his savings


Flags of the UK and EU with Big Ben in the background

🇬🇧 🤔 Brexit or… Bregret? Before London and Brussels start getting along, they have a few hurdles to jump over. (Bloomberg Opinion)

“The risk Europeans still see is UK domestic politics. Why rush for new deals that could be disowned yet again in the medium term?”, says Jonathan Faull, a former top UK official.

What else is happening

Missile rockets depicting Russia’s renewed offensive on Ukraine

🇷🇺 🇺🇦 Ukrainian air defense says Russian troops launched a cruise missile barrage early Thursday morning, hitting critical infrastructure. (Bloomberg)

It was the first major bombing in a week, but one of more than a dozen since early October. The missiles were launched from the air and sea; many were intercepted, the Ukrainian military said.

🇫🇷 France faces 5th day of pension protests. After a two-week truce during the school holidays, French unions will hold another strike on Thursday to oppose President Emmanuel Macron's plan to raise the retirement age. (Bloomberg)

The pension reform protests were the biggest of Macron's time as president. The French leader says it's a crucial part of his economic plan to boost employment and income and lower the national debt.

🤖 Robot attack. Elon Musk, who co-founded the company behind ChatGPT, warns A.I. is “one of the biggest risks" to civilization. (CNBC)

“One of the biggest risks to the future of civilization is AI. It’s both positive or negative and has great, great promise, great capability,” Musk said, adding that “with that comes great danger.”

And finally…

Kilonova, a spherical blast triggered by the merger of two very dense stellar remnants.
Source: Reuters

💥 The perfect explosion. Astronomers have observed what might be the "perfect explosion," called kilonova, a colossal spherical blast triggered by two neutron stars merging just before the combined entity collapses to form a black hole. (Reuters)

"It is a perfect explosion in several ways. It is beautiful, both aesthetically, in the simplicity of the shape, and in its physical significance," said astrophysicist Albert Sneppen of the Cosmic Dawn Center in Copenhagen.


See you next week!


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