July 10, 2023

“We received the Sentix Investor Confidence reporting, revealing a sustained slump in eurozone investor confidence, showing a 45bps decline from the month’s forecast. We are also eagerly awaiting the US Consumer Credit report for the month, as well as a number of speeches from Fed, BoE, and ECB officials at various events throughout the day.”

Tim Hallinan – Trading Director

Main Headlines

US President Joe Biden is scheduled to hold separate meetings with King Charles and British Prime Minister Rishi Sunak in London. The discussions are expected to focus on Ukraine and climate change. Biden’s visit is part of a three-nation trip, including a NATO summit in Lithuania aimed at demonstrating support for Ukraine in its conflict with Russia, however they have said that they will not be offering Ukraine membership into NATO. In other news, U.S. Treasury Secretary Janet Yellen visited Beijing without expecting immediate tension relief in meetings with China’s new top economic officials. Unfortunately, there was no breakthrough. The outcome of the 10-hour discussions, which covered various topics such as U.S. technology export controls, China’s “anti-espionage” law, and punitive actions against U.S. firms, remains uncertain in terms of altering the trajectory of the relationship between the world’s two largest economies.

India’s trade minister, Piyush Goyal, will discuss a free trade agreement with the UK and meet ministers from the European Free Trade Association. He will talk with Kemi Badenoch and other representatives from British industry to address trade barriers, promote investments, and foster collaboration in technology, innovation, and intellectual property rights, emphasizing the priorities of the free trade agreement. In other news, a survey published on Monday indicates that pay pressures in Britain’s labour market decreased in June. The Recruitment and Employment Confederation (REC) and accountants KPMG reported that the increases in starting salaries for both permanent and temporary staff were the lowest since April 2021. The Bank of England, which has implemented 13 interest rate hikes since late 2021 to address the highest inflation rate among major global economies, anticipates a slowdown in wage growth, which would help alleviate price pressures.

GBP

Sterling is weaker than most major currencies in the early morning trade. Later today we are due to hear from Bank of England Governor Bailey at a Financial and Professional Services Dinner in London. As head of the BoE he has a large influence over interest rates as well as overall monetary policy in Britain, and there will be some volatility expected if he has any comments or drops any clues. In other news Trade body Make UK and accountants BDO reported that business optimism reached its highest level since August 2022, aided by the indication of a significant drop in inflation pressure, which reached its lowest point in nearly two years.

EUR

The Euro is stronger against Sterling and weaker against the Dollar this morning. This morning we received the Sentix Investor Confidence reporting, which is a leading indicator economic health in the Eurozone as investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity. This report was 45bps lower than the forecast at -22.5, which is in line with the previous few months reporting showing a continued slump in investor confidence. Later today we will be hearing from Deutsche Bundesbank President Joachim Nagel, who is also a voting member on the Governing council of the ECB. He is due to participate in a moderated discussion titled “How does the financing of the future work?” at an event hosted by the German Chancellery and Bundesbank. As a large influence on the key interest rates in the Eurozone, there will be some volatility during this speech as he could drop some subtle hints on future EU monetary policy.

USD

The Dollar is well bid against most major currencies overnight. Later today we will be receiving the final wholesale inventories report from the US Census Bureau, which measures the change in the total value of goods held in inventory by wholesalers. Previous reporting has been in line with the forecasted figures, so we will see if this trend continues. We will also be hearing from Federal Reserve Governor Michael Barr at a fireside chat about bank supervision and capital rules at an online event hosted by the Bipartisan Policy Centre. These public engagements are often used to drop subtle clues regarding future monetary policy by Fed Members, so expect some volatility, especially as this chat is expecting some questions from the audience.

Markets

European stocks fell along with US equity futures at the start of a week in which inflation and interest rates will be the main focus after soft price data raised fresh worries about China’s economic recovery. Traders will look to US inflation numbers on Wednesday for signals on the Federal Reserve’s likely policy path and the rising risk of a recession. UK jobs data Tuesday will also be crucial in determining the Bank of England’s next policy decision in August.

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

10:30 a.m.: Euro-area June Sentix Investor Confidence
3:00 p.m.: Israel Rate Decision
4:00 p.m.: US May Wholesale Inventories
4:00 p.m.: Fed’s Barr speaks
5:00 p.m.: Fed’s Daly and Mester speak
5:15 p.m.: ECB’s Herodotou speaks
6:00 p.m.: Fed’s Bostic speaks
9:00 p.m.: US May Consumer Credit
9:00 p.m.: BOE’s Bailey speaks
Biden to meet Sunak in UK
Jeremy Hunt gives annual Mansion House speech

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