April 25, 2023

“EURUSD is sitting comfortably above 1.10 as we look ahead to what could be a choppy couple of weeks trading, with both the FOMC and ECB rate decisions next week. Data releases from the US this week will be closely watched, with traders looking for further signals on what path the Fed will choose.”

Tim Hallinan – Trading Director

Main Headlines

Today, the Conference Board Incorporated will release the Consumer Confidence Report, a key indicator of financial confidence and consumer spending based on a survey of 3,000 households assessing US economic conditions. The forecast of 104.1 is slightly lower than previous reports, and it will be interesting to see if this trend continues. Additionally, the Census Bureau’s New Home Sales report, which measures the annualized number of new single-family homes sold in the previous month, will also be released. This report is a leading indicator of economic health, as it impacts sales chain. While Nov-Feb showed higher-than-forecasted sales, March figures showed a 10k lower actual compared to the forecast, raising concerns about a potential downturn.

The UK’s budget deficit for the 2022/23 fiscal year rose due to government support for energy bills, reaching its fourth-highest level on record. However, it was still lower than forecasted, with borrowing of £139.2 billion or 5.5% of GDP, compared to £121.1 billion or 5.2% of GDP in the previous year, as reported by the Office for National Statistics (ONS). Meanwhile, London’s financial sector experienced a nearly one-third decline in job opportunities in Q1 2023, attributed to economic and geopolitical challenges, posing risks to finance roles in the UK.

GBP

Sterling is weaker than most major currencies in the early morning trade. This morning, the Office of National Statistics released the Public Sector Net Borrowing report, which reveals the variance between spending and income for public corporations, central government, and local governments in the previous month. The forecast was £20.5Bn, but the reported number exceeded this by £0.2Bn, indicating a marginal budget deficit in the UK. Later today, we are anticipating the CBI’s Industrial Order Expectations, a survey of approximately 550 manufacturers to gauge their anticipated order volume over the next 3 months. The last 3 reports have fallen below forecast, so we will see if this trend continues this month.

EUR

Euro is stronger against Sterling and weaker against the Dollar this morning. European military spending surged by 13% in response to heightened tensions, with Russia, Ukraine, and other countries driving the increase. Global military expenditure hit a record high in 2022, fuelled by Russia’s conflict in Ukraine, as reported by SIPRI. Total world military spending rose by 3.7% to $2.24 trillion in real terms, marking the largest annual increase in Europe since the Cold War era. In other news, Lithuania’s energy minister announced a pending decision on withdrawing from the treaty governing the power grid shared with Russia, Belarus, and the Baltic States by August 6th. Currently, Estonia, Latvia, and Lithuania rely on Russian operators for grid control as part of the BRELL circuit. While a 2018 deal aims for decoupling and joining the continental power grid by 2025, Lithuania plans to leave in early 2024, pending agreement from Latvia and Estonia.

USD

The Dollar is well bid against most major currencies overnight. Later today, the Federal Housing Finance Agency will unveil the House Price Index report, a key gauge of monthly changes in home purchase prices backed by Fannie Mae and Freddie Mac. This report serves as a leading indicator of the housing industry’s health, with implications for the broader market. Recent months have shown actual numbers surpassing forecasts, and eyes will be on whether this trend persists. Additionally, the Richmond Fed will release the Richmond Manufacturing Index, measuring business conditions like shipments, new orders, and employment. The past five months have shown mixed results in forecasts versus actual figures, adding intrigue to whether this month will reflect growth or a potential downturn.

Markets

European stocks declined as investors parsed a flood of earnings reports from some of the region’s biggest companies. The Stoxx Europe 600 index declined, with UBS Group AG dragging banks lower after results that fell short of analysts’ expectations. Banco Santander SA also dropped after reporting results. Food producer Nestle SA, freight operator Kuehne + Nagel International AG, drugmaker Novartis AG and engineering firm ABB Ltd. gained after earnings beats.

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

8:00 a.m.: UK March Public Sector Net Borrowing
11:00 a.m.: BOE’s Broadbent speaks
2:00 p.m.: Hungary central bank decision
2:00 p.m.: Poland March Money Supply
3:00 p.m.: US Feb. FHFA House Price Index
4:00 p.m.: US April Conf. Board Consumer Confidence, March New Home Sales

Corporate Events

Earnings include Santander, Spotify, Alphabet, Microsoft, Danaher, GE, GE Healthcare, GM, Kimberly-Clark, Halliburton, Enphase, McDonald’s, PepsiCo, UPS, Verizon, Visa
Norway’s Wealth Fund holds annual investment conference

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