August 25, 2023

“The US dollar climbed to its highest level in over two months this morning, and it is poised to achieve its sixth consecutive week of increases, as investors sought its safety as they awaited a speech from Federal Reserve Chair Jerome Powell to gauge the path of interest rates.”

Louis Pearce – Senior Trader 

Main Headlines

Donald Trump has turned himself in to authorities in Atlanta, Georgia, where he is confronting 13 criminal charges related to alleged efforts to undermine the outcome of the 2020 presidential election. The 77-year-old, who is currently the leading contender in the race to secure the Republican nomination for the presidency, was processed at Fulton County jail, photographed, and subsequently released on a previously arranged $200,000 bail. He subsequently shared his arrest photo on the social media platform X, formerly known as Twitter.

In August, consumer confidence in the UK experienced a larger-than-anticipated increase, supported by reduced energy costs and a faster pace of wage growth. The consumer confidence index, which gauges individuals’ perceptions of their personal financial situation and the broader economic outlook, climbed by five points to reach minus 25. This recovery effectively made up for most of the decline seen in July, bringing the index back to levels similar to those observed at the beginning of the previous year. Several economists attributed this improvement to a mitigation of the cost-of-living crisis.

GBP

Sterling is stronger against Euro and weaker against the dollar this morning. Official data indicates that the cost of the UK’s asylum system nearly doubled over the past year, reaching nearly £4 billion. This increase is primarily linked to the substantial rise in the backlog of claims processing. Meanwhile, both American and British companies are rapidly transferring their pension schemes to insurers, motivated by higher interest rates in the sector. The first half of 2023 witnessed approximately $22 billion in US corporate pension liabilities being shifted to insurance companies, with over £20 billion publicly announced in the UK.

EUR

Euro is weaker than most major currencies in the early morning trade. Dutch Foreign Minister Wopke Hoekstra has been nominated as the European Union commissioner, stepping in for Frans Timmermans, who departed to campaign for the position of Prime Minister of the Netherlands. The 47-year-old Christian Democrat is expected to oversee climate-related matters. After facing criticism for the duration, it took the Dutch brewing group to withdraw from the country following Russia’s full-scale invasion of Ukraine, Heineken has finally divested its Russian operations, incurring a loss of €300 million.

USD

The dollar is well bid against most major currencies this morning. Investors are becoming increasingly uneasy about the long-term fiscal outlook of the United States, characterized by ongoing deficits and the readiness of politicians to stimulate the economy using government funds. Treasury yields are presently at their highest point since 2007, and the potential for sustained budget shortfalls might exert further upward pressure on these yields. The Pentagon has announced that flight training for Ukrainian pilots on F-16 fighter jets will commence in October.

Markets

European stocks and US futures struggled for direction as a cautious tone dominated markets before a speech from Federal Reserve Chairman Jerome Powell that will be studied for clues on the interest-rate outlook. Energy and mining shares outperformed a flat Stoxx 600 Europe index as crude oil and iron ore prices climbed. US contracts were steady after tech stocks led declines on Wall Street on Thursday, wilting in the face of rising Treasury yields. The Nasdaq 100 dropped 2.2%, its worst day in three weeks.

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

10:00 a.m.: Germany Aug. IFO Business Climate
3:00 p.m.: Belgium Aug. Business Confidence
4:00 p.m.: University of Michigan Sentiment
4:05 p.m.: Fed’s Powell Speaks at Jackson Hole

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