Morning Report

July 11, 2024

“Huw Pill’s hawkish commentary and a growth rebound in May have catapulted sterling to a four-month high against the dollar this morning. We’ll be watching the US CPI print this afternoon to see whether this momentum can continue, or if it can kickstart a dollar recovery.”

Sam Cornford – Head of Trading


Main Headlines

The US House of Representatives Oversight Committee subpoenaed three White House aides yesterday, with the Republican-led group looking for depositions regarding the mental acuity of US President Joe Biden. The campaign among some donors and Democrats to oust Biden as party nominee has lost steam in recent days as he has remained defiant about standing for election, although Nancy Pelosi and George Clooney were among the big names failing to give him their support yesterday.

According to a survey conducted by EY, London took the top spot in Europe for new foreign direct investment last year, with gains concentrated in the tech and financial services sectors. Much of the rest of the UK saw falls, however, although FDI into the UK increased by 6% overall.


It’s an all-around great week for the UK: May GDP growth was double the consensus, the pound is at a four-month high against the dollar, and England are into Sunday’s final. Markets weren’t too bothered about the GDP figure this morning, admittedly, despite it bouncing back from a flat April to post 0.4% growth in May. Instead, it was BoE Chief Economist Huw Pill’s hawkish comments that took sterling higher yesterday – he sprinkled some doubt on the August rate cut with reference to an ‘uncomfortable strength’ in underlying inflation dynamics and caution that any single data point before that meeting had little power to materially change that assessment. The market-implied probability for cut in three weeks’ time subsequently slipped from 66% to around 50/50. There are few opportunities domestically for the pound to continue its run today – the BoE’s credit survey is unlikely to make a market impact – but a downside miss in the US inflation data could take it the 0.2% higher that it needs to notch a near one-year high.


A lack of market-moving events in the eurozone has been a positive turn of events for the euro this month, which has climbed higher against a weakening dollar after being battered by Macron’s election call in June. No concrete developments have come through in France yet, although Macron finally broke his silence yesterday to urge the formation of a mainstream coalition, which would likely please markets. German CPI in June was confirmed at 2.5% this morning, and it’s the US macro data to watch this afternoon.


The dollar weakened off yesterday in the lead up to this afternoon’s crucial CPI print. The House took its turn questioning Fed Chair Powell yesterday, and while he didn’t offer any meaningful fresh signals, the more dovish acknowledgements about the labour market from the past few days seemed to become enough for investors to remain optimistic about a September rate cut.  The consensus for today’s headline CPI figure – 3.1% y/y and 0.1% m/m – should be more than sufficient to keep those hopes alive, although a stronger-than-expected outcome could rapidly begin to narrow the window for the Fed to have gained enough confidence in two months’ time. A break below 3%, meanwhile, would give all the fuel needed to ratchet bets on two rate cuts this year higher. Jobless claims data is released this afternoon too, and these appear to have decisively broken into a higher range recently alongside a broader weakening in the labour market.


Another day, another record high for US stocks. Powell was cautious on Capitol Hill but kept rate cut hopes alive enough to keep the taps open for gains on Wall Street, with the S&P 500 and the Nasdaq hitting their sixth- and seventh-straight record closes at the end of yesterday’s session.  Equities globally followed the trend, with indexes in Asia and Europe inching higher.

Main Economic Events (All Times CET)

8:00am: UK GDP m/m
10:30am: BoE Credit Conditions Survey
2:30pm: US CPI Inflation
5:30pm: Fed’s Bostic speaks


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