The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

1102 GMT - The dollar could stay under pressure as U.S. banking sector troubles could prompt Federal Reserve Chair Jerome Powell to soften his tone at Wednesday's meeting, MUFG Bank says. Powell could deliver a more nuanced message and hints that the end of the interest rate rise cycle is nearing, MUFG analyst Derek Halpenny says in a note. "While Powell will stress the fight against inflation is ongoing, we don't see that communication resonating like it has done before." The DXY dollar index falls 0.2% to 103.059 after earlier hitting a five-week low of 102.978. The Fed announces its rate decision at 1800 GMT. (renae.dyer@wsj.com)

1016 GMT - Recent limited spread widening in the French 10-year government bonds versus equivalent German bonds has mainly been driven by the risk-off environment, triggered by the issues regarding U.S. regional banks and Credit Suisse, with no meaningful signs of idiosyncratic risks related to the new pension law, Amundi says. "This suggests that there is no major pricing of idiosyncratic risk for France at present," Amundi says in a note. However, should the political situation deteriorate further, additional spread widening could come with some overreaction, it says.The 10-year French OAT-German Bund spread is trading just below 53 basis points, according to Tradeweb. (emese.bartha@wsj.com)

1003 GMT - The euro could fall against the dollar as the Federal Reserve is likely to lift interest rates by 25 basis points and raise its rate guidance Wednesday but any decline may be brief, ING says. Regulators' efforts to contain the fallout from the UBS rescue takeover of Credit Suisse for bondholders is helping European sentiment, meaning market concern is now tilted to the U.S. given the unresolved regional banking crisis, ING analyst Francesco Pesole says in a note. "Beyond the FOMC impact, we think there is room for a break above EUR/USD 1.0800 in the near-term as long as sentiment continues to stabilise." EUR/USD rises to a five-week high of 1.0795, according to FactSet. The Fed's decision is at 1800 GMT. (renae.dyer@wsj.com)

1000 GMT - The U.K.'s rise in consumer prices comes after three months of successive declines, with prior expectations that prices would gradually ease toward the 2% target, Danni Hewson, AJ Bell's head of financial analysis, says in a note. That, added with two weeks of instability on financial markets, meant there had been expectations that the Bank of England would pause its rate-hike journey at its meeting Thursday, she says. "That can't be ruled out, but today's upward shift will be akin to popping a rooster into the henhouse," she says. But when just a few weeks ago supermarket salad aisles were suddenly empty, the rise in inflation maybe shouldn't have come as such a shock, Hewson adds. (edward.frankl@wsj.com)

0938 GMT - A day before the Bank of England makes its latest decision, it's faced with an unwelcome resurgence in U.K. core inflation, says James Smith, developed markets economist at ING, in a note. Core CPI was 6.2% in February, versus 5.8% in January, and more importantly shows that the surprise dip in services CPI in the first month of the year was a temporary one, he says. Policy makers have said service-sector inflation tends to be more persistent and less volatile, therefore more long-lasting, Smith says. But the bank has been paying less attention to a single indicator, and broader data has been more encouraging over the past month, with the BOE's main survey of businesses pointing to less aggressive price and wage rises, and wage data appearing to be easing, Smith says. (edward.frankl@wsj.com)

0929 GMT - Sterling rises after a surprise acceleration in Wednesday's U.K. inflation data but the currency's gains may be temporary, ING says. The data, along with a tentative recovery in market sentiment, reinforces the prospect of the Bank of England raising interest rates on Thursday, ING analyst Francesco Pesole says in a note. "Still, our economics team still deems a May pause as highly likely, and we continue to see the direction for EUR/GBP as bullish over the coming weeks." EUR/GBP falls 0.4% to 0.8783 and GBP/USD rises 0.6% to a near seven-week high of 1.2294, according to FactSet. U.K. inflation rose to 10.4% year-on-year in February from 10.1% in January, versus the 9.9% expected in a WSJ survey of economists. (renae.dyer@wsj.com)

0901 GMT - Oil prices weaken with all eyes fixed on the U.S. Federal Reserve meeting later in the day. Brent crude oil is down 0.5% at $74.96 a barrel while WTI declined 0.6% to $69.24 a barrel. The Fed is set to announce a decision on interest rates as well as release its economic projections following a period of banking turmoil, which itself has been driven by higher interest rates. While most investors are expecting a twenty-five basis point interest rate increase, how the Fed frames the rise and whether it addresses the banking issues will be keenly watched. (william.horner@wsj.com)

0859 GMT - U.K. gilt yields rise after data showed U.K. February inflation unexpectedly accelerated to 10.4% from 10.1% the previous month, raising expectations of more Bank of England interest rate rises, including on Thursday. "U.K. CPI inflation surprised strongly to the upside in February, ahead of the 9.9% y/y expected by analysts and the BOE in the February monetary policy report," RBC Capital Markets analysts write in a note. U.K. 10-year gilt yields last trade up 12 basis points at 3.482%, Tradeweb data show. U.K. 2-year gilt yields are last up around 17bps at 3.473%. (miriam.mukuru@wsj.com)

0832 GMT - Money markets are now fully pricing in a 25 basis point interest-rate rise by the Bank of England on Thursday following higher-than-expected U.K. inflation figures, Refinitiv data show. A rate increase of this magnitude would bring the bank rate to 4.25%. U.K. inflation unexpectedly rose in February, with annual CPI increasing 10.4%, up from 10.1% in January and well above the expectations of economists polled by The Wall Street Journal for a deceleration to 9.9%. (emese.bartha@wsj.com)

0818 GMT - As market sentiment stabilizes after recent banking sector worries, the U.S. Federal Reserve is likely to raise interest rates by 25 basis points in a decision later, which should help the dollar recover, ING analyst Francesco Pesole says in a note. However, the decision is "a close call," and dollar gains may be limited by the improved sentiment, he says. "There is room for the dollar to recover some ground on the back of a moderate hawkish surprise by the Fed. However, we are observing a gradual improvement in investor sentiment... which makes us tilt to a bearish short-term bias in the dollar." The DXY dollar index falls 0.1% to 103.126. (jessica.fleetham@wsj.com)

0815 GMT - Stronger-than-expected U.K. February inflation increases the chances of a 25 basis-point rate increase by the Bank of England when it announces a decision on Thursday, say Mizuho analysts in a note. U.K. inflation in February rose to 10.4% from 10.1% the previous month, stronger than the 9.9% consensus by economists in a WSJ poll. Core inflation increased to 6.2% from 5.8%. (miriam.mukuru@wsj.com)

0815 GMT - The Philippine central bank is expected to raise its benchmark overnight borrowing rate by 25 basis points to 6.25% at its policy meeting on Thursday, according to a poll of eight economists surveyed by The Wall Street Journal. Seven expect the Bangko Sentral ng Pilipinas to increase the rate by a quarter percentage point, while one projects a 50bp rise. Citi says in a research note that it expects recent U.S. financial market turmoil and a global growth slowdown to lead to policymakers avoiding a 50bp increase. (kosaku.narioka@wsj.com; @kosakunarioka)

(END) Dow Jones Newswires

March 22, 2023 07:02 ET (11:02 GMT)

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