Morning Report

May 16, 2023

“Today’s data reveals increasing unemployment in Britain may alleviate inflationary pressure, reducing the likelihood of another Bank of England rate hike. Meanwhile, attention is drawn to influential reports like the German ZEW Economic Statement in the Eurozone and the pivotal monthly US Retail Sales”

Sam Cornford, Partner – Head of Trading

Main Headlines

The U.S. Treasury Department reaffirmed that without a debt limit increase, it can only cover the U.S. government’s expenses until early June, adding pressure on congressional Republicans and the White House to reach an agreement soon. In her second letter to Congress within two weeks, Treasury Secretary Janet Yellen confirmed the likelihood of being unable to fulfil all government payment obligations by early June, potentially leading to the first-ever U.S. default. Yellen stated that the debt ceiling could become binding by June 1.

BoE Chief Economist Huw Pill warned of persistent high inflation if second-round effects are not addressed. He stressed the risk of self-sustaining momentum leading to inflation stabilizing at 4% or 5%, rather than the 2% target. The Bank of England aims to prevent a scenario where inflationary pressures subside, but businesses and workers still seek significant price and wage increases, as Pill stated in an online presentation. In other news, according to the independent Institute for Fiscal Studies (IFS), Britons are set to experience the largest tax increase since Margaret Thatcher’s tenure as prime minister. The IFS stated that in the coming years, a growing number of individuals will be pushed into the highest income tax bracket, with 7.8 million people or 14% of adults expected to pay at least 40% of their income in taxes by the 2027/28 financial year. This figure is up from 11% in 2022/23 and a mere 3.5% in 1991/92.


Sterling is weaker than most major currencies in the early morning trade. Britain’s rising unemployment rate signals decreased inflationary pressure, causing investors to lower expectations for future Bank of England interest rate hikes. The jobless rate reached 3.9% in the three months ending in March, surpassing economists’ forecasting. Concerns arise over a shortage of job candidates, driving significant wage increases that fuel inflation, however pay growth remains strong, with a slight rise in basic wages from the public sector, while total pay, including bonuses, remains stable, as per Office for National Statistics (ONS) data. This rising unemployment rate also led to a decline in the pound, relieving pressure on the Bank of England to raise interest rates. Presently, the pound is down 0.3% against the dollar at $1.25 and down 0.3% against the euro at 87.06 pence. ING strategist Francesco Pesole observed that the chances of a pause at the June meeting have slightly risen, given the importance of this data release for the Bank of England.


The Euro is well bid against most major currencies overnight. Today, we anticipate several reports from the Eurozone, with the most significant being the German ZEW Economic Statement at 10 am. This report gauges economic health through a diffusion index based on surveys of German institutional investors and analysts. It serves as a leading indicator, reflecting the 6-month economic outlook for Germany. Changes in sentiment among around 300 respondents can provide early signals of future economic activity. The forecast for this report stands at -5.4, considerably lower than the previous three months, prompting interest in the continuation of this trend. Additionally, throughout the day, European ECOFIN meetings will address various financial matters, including euro support mechanisms and government finances. Although closed to the press, officials typically engage with reporters, potentially providing insights throughout the day


The Dollar is stronger against Sterling and weaker against the Dollar this morning. Today’s US economic reports include both the monthly Core Retail Sales, which excludes the automobile industry, and holistic retail sales reporting for the entire country. The Core data is considered a better indicator of actual spending trends as automobile numbers are excluded due to their volatility and distortion of underlying trends. These reports are crucial to understanding consumer spending, which is a significant contributor to economic activity. The Core Report is forecasted at 0.5%, and Total Retail Sales at 0.8%, which is consistent with previous forecasts. We will wait to see if this trend continues.


Japan’s Topix equities benchmark climbed to the highest since 1990 on optimism the world’s third-largest economy will outperform peers. The pound weakened after a bigger-than-expected drop in UK employment numbers. European stocks and US equity futures declined before another round of talks in Washington aimed at ending the debt-ceiling stalemate. Most Asian equities advanced.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: UK March Labour Market Statistics
8:30 a.m.: Hungary 1Q GDP
9:30 a.m.: Netherlands 1Q GDP
10:00 a.m.: Italy April CPI
10:00 a.m.: Poland 1Q GDP
10:15 a.m.: ECB’s Makhlouf speaks
11:00 a.m.: Germany May ZEW Survey
11:00 a.m.: Euro-Area 1Q GDP
2:00 p.m.: Poland April CPI
2:15 p.m.: Fed’s Mester speaks
2:30 p.m.: US April Retail Sales
3:15 p.m.: US April Industrial Production
4:00 p.m.: ECB’s Lagarde speaks
4:00 p.m.: Fed’s Barr testifies before the House Financial Services Committee
6:15 p.m.: Fed’s Williams speaks
8:30 p.m.: Fed’s Goolsbee speaks
Economic and Financial Affairs Council (ECOFIN) meeting in Brussels
Council of Europe meeting in Reykjavik

Corporate Events

Earnings include Vodafone, Siemens, Imperial Brands, Ubisoft, Euronext, Bouygues, Sonova, Home Depot, Keysight Tech
Aviation Festival Americas in Miami through May 17


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