Morning Report

July 11, 2023

“The pound reached a 15-month high against the dollar today as pay growth exceeded expectations, with underlying earnings rising by 7.3% year-on-year. This puts pressure on the Bank of England to raise interest rates. Other key events today include the release of Germany’s ZEW economic sentiment index for July and the NFIB measure of US small business sentiment for June.”

Tim Hallinan – Trading Director


Main Headlines

Over 20 hardline Republicans in the US House of Representatives issued a warning to Speaker Kevin McCarthy yesterday, stating that they would obstruct their party’s fiscal 2024 appropriations bills unless spending levels were reduced below the levels agreed upon by McCarthy and President Joe Biden in May. The group of hardliners, which includes members of the House Freedom Caucus, also called on McCarthy to postpone appropriations votes in the House of Representatives until all 12 government funding bills have been finalized and can undergo a thorough review side by side.

A joint statement from the UK and the US announced today that finance leaders, companies, and philanthropies have committed over $2 billion to support initiatives aimed at reducing carbon emissions and enhancing climate resilience in Africa, Asia, and Latin America. The statement was made by Grant Shapps, the UK’s Energy Security and Net Zero Secretary, and John Kerry, the US Special Presidential Envoy on Climate, following a Climate Finance Mobilisation Forum held at Windsor Castle, England. The forum aimed to bolster private capital flows to emerging economies.



Sterling is well bid against most major currencies overnight. The Office for National Statistics reported that a key measure of British wages has reached its highest growth rate on record, but there are also signs indicating a decrease in inflationary pressure in the labor market. Basic earnings increased by 7.3% in the three-month period leading up to May, matching the reading from the previous three months ending in April. This figure, which was initially estimated at 7.2%, has also equaled the growth rate observed in the second quarter of 2021. Following the release of this data, the pound rose by 0.3% against the dollar, reaching a 15-month high. It also experienced moderate gains against the euro.



Euro is stronger against the Dollar and weaker against Sterling this morning. New data from Eurostat reveals that in 2022, more than 8.3% of individuals in the European Union were unable to afford a meal containing meat, fish, or a vegetarian alternative every other day. This percentage increased by one point compared to the previous year. Additionally, the proportion of Europeans at risk of poverty who could not afford a proper meal rose by over two points to nearly one-fifth (19.7%). The countries with the highest share of their population unable to afford a proper meal were primarily located in Eastern Europe, with Romania leading at 22.1%, followed by Bulgaria at 21.6% and Slovakia at 15.8%. Conversely, Ireland had the lowest share at 1.4%, followed by Cyprus at 1.5% and Luxembourg at 1.8%.



The Dollar is weaker than most major currencies in the early morning trade. Following signals from Federal Reserve officials that the central bank is approaching the end of its tightening cycle, the dollar weakened to a two-month low today, while the pound reached its highest level in 15 months due to better-than-expected wage growth. Several Fed officials stated on Monday that further interest rate hikes would likely be necessary to address inflation, but they also indicated that the current monetary policy tightening cycle was nearing its conclusion. These comments caused the greenback to decline against a basket of currencies, as traders adjusted their expectations regarding future rate increases in the United States.



European markets showed positive momentum this morning, reflecting the trend observed in the US after Wall Street broke its three-day losing streak. Investors are eagerly awaiting crucial US inflation figures later this week. The pan-European Stoxx 600 index started the day with a 0.3% increase, although it later trimmed some of its initial gains. Mining stocks led the upward movement with a 1.4% rise, while the automotive sector experienced a slight decline of 0.5%. Most sectors and major stock exchanges traded in favorable territory. In early premarket trading, US stock futures showed minimal changes following modest gains in the major US indices on Monday.


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

6:30 a.m.: Netherlands June CPI
8:00 a.m.: UK June Jobless Claims, May ILO Unemployment Rate
8:00 a.m.: Germany June CPI
9:00 a.m.: Turkey May Current Account Balance
10:00 a.m.: Italy May Industrial Production
10:30 a.m.: Bank of Italy releases banks and money monthly statistics
11:00 a.m.: German July ZEW Survey Expectations
11:00 a.m.: Euro-area July ZEW Survey Expectations
3:00 p.m.: Russia 2Q Current Account Balance
NATO holds its annual summit in Lithuania, through tomorrow.


Corporate Events

Earnings include America Movil, Tryg, Telekom Austria, Kinnevik, Nordic Semiconductor


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