August 30, 2022

“Today, the focus will be on the Eurozone economic sentiment data for August. In addition, US consumer confidence (August) and remarks from several top Fed officials will be featured.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Nasa called off the launch of its mighty new moon rocket on its debut flight with three test dummies aboard yesterday, after encountering a last-minute cascade of problems culminating in unexplained trouble involving an engine. The next launch attempt will not take place until Friday at the earliest and could be delayed until mid-September or later.

Liz Truss was dealing with a backlash yesterday for what critics referred to as “regressive” proposals by her allies for an enormous minimize in VAT meant to deal with inflation and ease the price of dwelling disaster. Proposals floated over the weekend for deep cuts in VAT had been criticised by her opponents and a few economists for not focusing on help on the households that want it most, in addition to for stoking inflation.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. UK Chancellor of the Exchequer Nadhim Zahawi said he’s working on additional measures to help households and businesses with soaring energy bills. The proposals will help the incoming prime minister “hit the ground running” after a leadership vote in the governing party concludes next week. Smaller businesses, in particular, will likely need assistance as a result of the energy crisis. Zahawi’s remarks come as economic headwinds build against the UK, with the Bank of England predicting a recession lasting more than a year.

EUR

Euro is well bid against most major currencies overnight. The European Union is set to meet its gas storage goal two months ahead of target as the bloc braces for a tough winter. Reserves were filled up to 79.4% as of Aug. 27 with a target of 80% by Nov. 1. The EU bolstered its storage rules earlier this year after levels last winter turned out lower than in past years, particularly in German sites controlled by Russian exporter Gazprom. Still, the bloc is preparing emergency steps to fix its power market and the French government urged businesses to cut energy use or face possible rationing.

USD

The dollar is weaker than most major currencies in the early morning trade. The Fed will finally begin unloading the Treasury bills it started amassing almost three years ago as it ramps up unwinding its $9 trillion portfolio. It plans to boost its monthly caps for Treasuries and holdings of mortgage-backed securities that it will let mature to $60 billion and $35 billion, respectively. There’s been keen interest in the Fed’s bill holdings because it didn’t own any of the securities the last time it undertook so-called quantitative tightening.

Markets

Equity markets moved lower on both sides of the Atlantic once again yesterday. The Euro Stoxx 50 shed 0.9%, while on Wall Street, the S&P 500 finished down 0.7%. On bond markets, Euro-area benchmark yields rose 6-13bps, as futures markets contemplated the prospects of a 75bps rate hike from the ECB next week. However, in a speech yesterday, ECB Chief Economist Lane espoused the need for the ECB to hike at a “steady” space, indicating that another 50bps rate hike may be on the cards.

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

9:00 a.m.: Spain Aug. CPI, July retail sales
9:00 a.m.: Czech Republic 2Q GDP
10:30 a.m.: UK July mortgage approvals, consumer credit,
11:00 a.m.: Euro-Area Aug. economic confidence
1:15 p.m.: ECB’s Vasle speaks
2:00 p.m.: Fed’s Barkin speaks
2:00 p.m.: Hungary Aug. rate decision
2:00 p.m.: Germany Aug. CPI
3:00 p.m.: US June FHFA House Price Index
4:00 p.m.: US Aug. Conf. Board consumer confidence, July JOLTS job openings
5:00 p.m.: Fed’s Williams speaks
6:00 p.m.: ECB’s Holzmann, Stournaras, Muller, Wunsch and Riksbank’s Ingves speak at Alpbach Forum
EU foreign ministers meet in Prague

Corporate Events

Earnings include Best Buy, Chewy, HP, CrowdStrike, Partners Group, Bunzl, Adevinta, Brunello Cucinelli

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