Morning Report

August 16, 2022

“The safe-haven US dollar hovered near a one-week high this morning, recovering some ground lost in the aftermath of last week’s CPI data release. Meanwhile, other major currencies remain under pressure as weak global economic data continues to spread recession fears.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Economists at Goldman Sachs said the Federal Reserve’s path to bringing down runaway inflation while keeping the economy from slipping into a major downturn is still open but is getting narrower. As the central bank looks to keep raising interest rates, the economy is teeming with mixed signals: rapidly rising payroll figures against sharply declining housing numbers, falling gasoline prices vs. surging shelter and food costs, and low consumer sentiment against steady spending numbers. Amid it all, the Fed is trying to strike a balance between slowing things down. On that score, Goldman economists think there have been clear wins, some losses and a landscape ahead that poses substantial challenges.

Workers suffered a record fall in the value of their wages in the three months to June as price rises rampaged further ahead of pay packets. In cash terms, regular pay picked up a little more pace to grow by 4.7pc in the quarter compared with the same period of 2021, marking the strongest growth since September last year. But at the same time inflation accelerated to hit a new four-decade high of 9.4pc in June, with price rises far outstripping any rise in average earnings. In real terms, regular pay in the quarter dropped by 3pc compared with the same period last year, the Office for National Statistics said, which is the steepest drop since records began in 2001.


Sterling is stronger against euro and weaker against the dollar this morning. Tens of millions of pounds’ worth of fruit and vegetables went to waste in the first half of this year because of labour shortages on British farms. The National Farmers’ Union estimated that up to £60mn of produce was thrown away because of a lack of fruit and vegetable pickers. The UK has become the first country to authorise a Covid-19 vaccine tailored to the Omicron variant, setting the stage for an autumn booster campaign using Moderna’s two-strain shot. Britain’s Labour Party called for the energy price cap to be frozen to help people deal with another expected surge in fuel bills.


Euro is weaker than most major currencies in the early morning trade. The European Commission wants to boost output of homegrown raw materials needed for green energy. Its plans may lower regulatory barriers to mining and production of critical materials such as lithium, cobalt and graphite, needed for wind farms, solar panels and electric vehicles. Vladimir Putin said this morning that Western countries were seeking to extend a “NATO-like system” into the Asia-Pacific region. He said that the United States was trying to “drag out” the conflict in Ukraine, and that Pelosi’s visit to Taiwan earlier this month had been “a thoroughly planned provocation”.


The dollar is well bid against most major currencies overnight. Drugmakers are launching new medicines at record-high prices this year, a Reuters analysis has found, highlighting their pricing power even as Congress moves to cut the $500 billion-plus annual bill for prescription drugs in the United States. US President Joe Biden is due to sign legislation that will eliminate electric vehicle tax credits for most models currently getting up to $7,500 effective. The US Federal Aviation Administration said air traffic was returning to normal after earlier warning that passengers at New York City-area airports could see significant delays due to air traffic control staffing issues.


US stock-index futures fell, and the dollar rose as investors fretted over signs of a sharp economic slowdown even as the Federal Reserve stays on the path of monetary tightening. Contracts on the S&P 500 and Nasdaq 100 indexes dropped at least 0.2% after the equity benchmarks advanced yesterday. Crude oil retreated as weak economic data in the US and China clouded the outlook and prospects grew for an increase in supply. The greenback rose 0.2% after fluctuating between gains and losses. European stocks opened higher. A sharp drop in New York state manufacturing, along with the longest streak of declines since 2007 in homebuilder sentiment, sparked short-lived optimism in the equity markets that the Fed may slow interest-rate hikes.

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

11:00 a.m.: Germany August ZEW Survey
11:00 a.m.: Euro-Area June trade balance
11:00 a.m.: UK sells bonds
11:15 a.m.: Switzerland sells bills
12:00 p.m.: Israel 2Q GDP
2:00 p.m.: Poland July CPI
2:30 p.m.: US July housing starts, building permits
3:15 p.m.: US July industrial production
Biden signs climate and tax package

Corporate Events

Earnings include Walmart, Home Depot, Agilent, On Holding


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