Morning Report

July 13, 2023

“As the US inflation unexpectedly eased, the sliding dollar faced further downward pressure in the Asian market this morning. Meanwhile, UK GDP declined by 0.1% for the month, after growth of 0.2% in April. This decline was primarily influenced by the additional bank holiday weekend for the royal occasion, which resulted in sectors such as construction and finance experiencing the loss of a working day within the month.”

Tim Hallinan – Trading Director

Main Headlines

US inflation fell sharply to 3 per cent in June, sending the dollar lower and highlighting the Federal Reserve’s relative success at bearing down on price pressures. This emphasizes the Federal Reserve’s relative success in managing price pressures. The latest data presents a contrasting scenario compared to other advanced economies like the UK, where the Bank of England is struggling to control inflation, which stands at 8.7 percent. Furthermore, major US stock indices reached their highest levels in 15 months, the two-year Treasury yield dropped to a two-week low of 4.72 percent due to changing interest rate expectations, and the US dollar index, which measures the value of the dollar against a basket of currencies, reached its weakest point in 15 months.

In May, the UK economy experienced a slight contraction, primarily attributed to an additional bank holiday that reduced activity. However, the decline was less severe than economists had anticipated. According to data released by the Office for National Statistics (ONS) on Thursday, the UK’s gross domestic product fell by 0.1 percent between April and May following a previous month of expansion. Economists surveyed by Reuters had expected a 0.3 percent decrease. Darren Morgan, ONS director of economic statistics, stated that the decline was driven by a decrease in manufacturing, energy generation, and construction activities, partly due to one fewer working day than usual.


Sterling is well bid against most major currencies this morning. A cross-party group of parliamentarians has warned the UK Prime Minister that the country’s pursuit of “reckless” deep-sea mining in international waters for battery metals poses a threat to the sea’s role as a carbon sink and risks causing irreparable harm to biodiversity. Junior doctors in England have commenced the longest-ever single walkout by doctors in the history of the NHS. This five-day strike has raised concerns among hospital administrators, who warned that it would further hinder efforts to address treatment backlogs. Housing demand and prices have declined across the UK, leading to a significant pessimism among estate agents, which hasn’t been seen in the past 14 years, as the market is impacted by surging mortgage rates.


Euro is stronger against the dollar and weaker against sterling this morning. The Mediterranean region will continue to experience extreme heat in the coming week, while southern Germany and the Alps will also face high temperatures, which will put pressure on the Rhine River. Italy is expected to be affected by the heatwave starting on Wednesday, with Sicily and Sardinia anticipated to experience the most severe conditions. Portugal’s finance minister cautioned that additional interest rate hikes by the European Central Bank could pose risks to the euro-area economy as it aims to recover from a recession. Meanwhile, the European Parliament passed a contentious law aimed at restoring degraded natural ecosystems, countering the opposition of centre-right lawmakers who sought to eliminate environmental measures.


The dollar is weaker than most major currencies in the early morning trade. The US junk bond market, valued at $1.35 trillion, has contracted by nearly $200 billion since reaching its peak in late 2021. This reduction has helped stabilize prices, although some investors believe that it may provide misleading signals regarding the health of the world’s largest economy. US consumers are planning significant reductions in their budgets for back-to-school supplies, indicating that inflation is impacting discretionary spending in the country. Microsoft achieved a remarkable victory in court against US regulators who sought to block its acquisition of video game maker Activision Blizzard. This unexpected outcome has revived the prospects of a $75 billion deal that many on Wall Street had previously believed was unlikely to succeed.


The dollar extended its losses ahead of US producer prices data, which may support the case that the Federal Reserve is nearing its peak rate hikes. Stocks and currencies in Asia rallied on growing risk appetite. A gauge of the dollar fell for a fifth day Thursday to remain at the lowest in over a year. The world’s reserve currency dropped almost 1% Wednesday after US inflation rate slid to a two-year low, easing pressure on global markets worried of higher policy rates and a potential recession.

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

8:45 a.m.: France June CPI
9:00 a.m.: Czech June CPI
9:00 a.m.: Turkey May Retail Trade
10:30 a.m.: BOE Liabilities/Credit Conditions Surveys
11:00 a.m.: Euro-area May Industrial Production
12:00 p.m.: Ireland June CPI
1:30 p.m.: ECB publishes Account of June Rate Decision
French President Emmanuel Macron hosts Indian PM Narendra Modi at dinner in Paris
Antony Blinken to meet China counterpart Wang Yi in Jakarta

Corporate Events

Earnings include Wipro, PepsiCo, Delta Air, Progressive Corp, Cintas, Fastenal, Conagra, Aker BP


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