Morning Report

August 11, 2023

“UK GDP surpassed expectations this morning by 0.3%, coming in at 0.5% for June, with the quarterly figure positive 0.2%. Manufacturing production also exceeded expectations, rising to 2.4%, its highest since September 2020. We now look ahead to the US PPI and Consumer Sentiment data this afternoon.”  

Tim Hallinan – Trading Director 

Main Headlines 

President Biden seeks Congressional approval for around $40 billion in added spending, encompassing $24 billion for international needs, including Ukraine, $4 billion for border security, and $12 billion for disaster relief in the first quarter of the 2024 fiscal year. While the White House aims for agreement, opposition may arise, with some Republicans aiming to reduce assistance to Kyiv following the 2022 Russian invasion. In other news, Texas saw power demand reach an all-time high for the third time this week and the tenth time this summer. The Electric Reliability Council of Texas, responsible for the grid serving 90% of the state’s power, reported preliminary usage of 85,435 megawatts on Thursday, surpassing Wednesday’s record of 83,961 megawatts. Despite this, they assured sufficient power supply for current needs. 

Surprising growth in the second quarter boosts UK’s prospects for further Bank of England rate hikes. However, despite this progress, the economy still lags behind its pre-COVID level, unlike other major advanced economies. Official data revealed a 0.2% growth, defying expectations of no change. This strengthens expectations for ongoing rate increases, aligning with the central bank’s emphasis on economic resilience as a key factor in its decision-making. In other news, Savills revised down yearly forecasts due to a 72% profit drop in half-year profit, impacted by high interest rates and reduced property transactions globally. The London-listed firm’s shares fell over 10%, making it a top FTSE 250 loser. Transaction activity has remained weak ever since the onset of the pandemic, particularly in the office and retail segments. 


Sterling is well bid against most major currencies overnight. Earlier this morning the Office for National Statistics released the GDP figures for the month of June. With a forecast of 0.2%, it was beaten handily by 3bps to 0.5%, a positive signal for the UK’s economic health. The ONS also released the Manufacturing production report, measuring the fluctuation in real manufacturing output. The forecast was 0.2% was considerably lower than the actual figure of 2.4%, the highest seen since September 2020. 


The Euro is stronger against the Dollar and weaker against Sterling this morning. Earlier today, 2 reports from the Eurozone were released. Firstly, the French Final m/m CPI, which measures consumer price fluctuations, was forecast at 0.0% but was beaten by 1bps at 0.1%. However, this is well below the 1.0% seen a few months ago. The Italian Trade Balance report was also released, measuring the import vs export trade value for the months. The forecast was 4.23Bn, however this was beaten by 3.49Bn to 7.72Bn overall, which is the 2nd highest reported figure since September 2021. 


The Dollar is weaker than most major currencies in the early morning trade. Later today, US PPI data will be released, a leading indicator of consumer inflation. The headline figure is expected at 0.2%, with the core at 0.1%. Following this, the University of Michigan will release the Preliminary Consumer Sentiment report, a survey rating current and future economic conditions, and Preliminary Inflation Expectations, measuring the anticipated consumer price change over the next year. The current forecast for the former is 71.4, which is considerably higher than any of the previous forecasting for the last 18 months. 


European equities fell, tracking markets lower in Asia, as concern about local government debt in China and hawkish language from a US central banker put traders in a risk-off mood. The Stoxx 600 index dropped 0.5%, snapping two days of gains and trimming its fourth weekly advance in five. US equity futures were little changed, and Treasury yields edged lower. The British pound led gains among G-10 currencies against the dollar after the strongest quarterly growth in more than a year. 

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

8:45 a.m.: France July CPI
9:00 a.m.: Spain July CPI
9:00 a.m.: Turkey June Current Account
9:00 a.m.: Czech central bank publishes Aug 3. Minutes
2:30 p.m.: US July PPI
4:00 p.m.: US Aug. University of Michigan Consumer Sentiment
6:00 p.m.: Russia 2Q GDP 


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