Morning Report

December 1, 2022

“EURUSD recovered yesterday as the dollar came under pressure after Fed’s Jerome Powell signalled a slowing pace in interest rate hikes. However, the pair’s upward momentum has been paused as the latest German retail sales data was lower than expected this morning. All eyes are on US PCE inflation and the manufacturing PMI data today. Additionally, a speech from ECB ‘s Lane will be closely watched.”

Sam Cornford, Partner – Head of Trading


Main Headlines

The House of Representatives yesterday voted to approve a bill to block a potentially crippling US rail strike, but also to mandate paid sick time for the workers. The House voted 290-137 to impose a tentative contract deal that had been reached in September, but which four key unions had refused to join, on a dozen unions representing 115,000 workers. The US president had warned of the catastrophic impact of a rail stoppage that could begin as early as 9 December and could cost the US economy about $2bn a day by some estimates, with chaos hitting freight and passenger traffic.

Britain’s health service faces further disruption in December after thousands of ambulance workers represented by three different trade unions voted for strike action in disputes over pay and conditions. The GMB union said more than 10,000 ambulance workers across England and Wales had voted in favour of industrial action, while the Unite and Unison trade unions also said their ambulance service members had backed walkouts. UK’s state-run National Health Service (NHS) is braced for a wave of unprecedented industrial action this winter, with up to 100,000 nurses due to take strike action on Dec. 15 and 20 for the first time in 100-year history.



Sterling is well bid against most major currencies overnight. Brexit added almost £6bn to UK food bills in the two years to the end of 2021, affecting poorest households the most. The cost of food imported from the EU shot up because of extra red tape, adding £210 to the average household food bills over 2020 and 2021, London School of Economics (LSE) researchers discovered. The research comes the day after data from the British Retail Consortium trade body showed UK food price inflation hit a record high of 12.4% in November as the price of basics such as eggs, dairy products and coffee rose.



Euro is stronger against the dollar and weaker against sterling this morning. German retail sales slumped in October, setting an ominous tone for a fourth quarter in which Europe’s largest economy is widely expected to shrink. Sales fell 2.8% in inflation-adjusted terms, and were even down 1.7% in absolute terms, from September, as consumers reduced their outlays on non-essential items in particular in the face of surging fuel bills. Non-food sales fell a thumping 4.5% from September and were down 5.5% from a year earlier, while food sales were down 1.2% on the month and 3.9% on the year. Germany’s HDE retail association is forecasting the strongest slump in Christmas sales since 2007, with retail sales in the crucial November-December period seen dropping by 4% year-on-year on a price-adjusted basis.



The dollar is weaker than most major currencies in the early morning trade. The dollar dipped yesterday after Federal Reserve Chairman Jerome Powell said that the US central bank could scale back the pace of its interest rate hikes “as soon as December”. He indicated the central bank is preparing to slow the pace of interest rate rises as it tackles a 40-year high in inflation. But Powell warned there “was more ground to cover” and rates would stay higher for an extended period. In a speech to the Brookings Institution, Powell said that the Fed may increase its key interest rate by a smaller increment at its December meeting, only a half-point, after four straight three-quarter point hikes.



European markets were higher this morning after US Federal Reserve Chair Jerome Powell said smaller interest rate hikes could begin in December. The pan-European Stoxx 600 was up 0.8% in early trade to notch a six-month high, with tech stocks climbing 2.6% to lead gains while autos fell 0.6%. US Stocks saw broad gains yesterday. The Dow Jones Industrial Average closed up 737.24 points, or 2.18%, to 34,589.77. Meanwhile, the tech-heavy Nasdaq Composite jumped 4.41% to 11,468.00. The S&P 500 added 3.09% to 4,080.11.


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

7:00 a.m.: Russia Nov. S&P Global Manufacturing PMI
8:00 a.m.: Turkey Nov. S&P Global/ICI Manufacturing PMI
8:00 a.m.: Germany Oct. Retail Sales
8:00 a.m.: UK Nov. Nationwide House Price
8:15 a.m.: Riksbank’s Floden speaks
8:30 a.m.: Sweden Nov. Swedbank/Silf PMI Manufacturing
8:30 a.m.: Switzerland Nov. CPI, Oct. Retail Sales
9:15 a.m.: Spain Nov. S&P Global Manufacturing PMI
9:30 a.m.: Switzerland Nov. Manufacturing PMI
9:45 a.m.: Italy Nov. S&P Global Manufacturing PMI
9:50 a.m.: France Nov. S&P Global Manufacturing PMI
9:55 a.m.: Germany Nov. S&P Global/BME Manufacturing PMI
10:00 a.m.: Euro-area Nov. S&P Global Manufacturing PMI
10:30 a.m.:  UK Nov. S&P Global/CIPS Manufacturing PMI
11:00 a.m.: Euro-area Oct. Unemployment
11:00 a.m.: UK to sell bonds
2:30 p.m.: US Oct. PCE Deflator, weekly jobless claims
5:45 p.m.: ECB’s Lane speaks
Italy Nov. Budget Balance
Emmanuel Macron meets Joe Biden at the White House


Corporate Events

Earnings include TD Bank, Bank of Montreal, Dollar General, Kroger



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