July 18, 2023

“As we anticipate today’s releases, we eagerly await the Core Retail sales monthly reporting and the reports on Industrial Production levels. The current forecasts stand at +0.4% and 0.0% respectively. Additionally, we are tentatively expecting the EU Economic forecasts from the European Commission, which will shed light on potential austerity measures and other compelled spending cuts throughout the EuroZone.”

Tim Hallinan – Trading Director

Main Headlines

The Education Department announced on Friday that US President Joe Biden’s administration will forgive $39 billion in student debt for over 804,000 borrowers. This relief is attributed to a “fix” in the income-driven repayment plans. Eligible borrowers will qualify for forgiveness after making 20 or 25 years of monthly IDR payments. The IDR program limits payment obligations for lower-income borrowers and forgives their remaining balance after a specified period. In other news, US Senate Majority Leader Chuck Schumer aims to add a bipartisan amendment to defence policy legislation, sanctioning China for its alleged involvement in producing synthetic opioid fentanyl. Schumer alleges the drug originates from Chinese production sites with the government’s acceptance. Beijing has countered these accusations, asserting that the US uses the fentanyl crisis as a pretext for imposing sanctions on Chinese firms.

The British government announced the implementation of new sanctions, targeting Russian Education Minister Sergey Kravtsov and others involved in what they consider Moscow’s forced deportation of Ukrainian children. These 13 sanctions designations were imposed in response to “Russia’s attempts to destroy Ukrainian national identity,” with some individuals linked to the forcible relocation of children. In other news, Rishi Sunak will convene the inaugural meeting of his new business council, aiming to support economic growth and garner support from the business community. Downing Street talks will include chief executives and chairpersons from prominent British companies such as AstraZeneca, NatWest Group, BAE Systems, Sainsbury’s, Vodafone, Diageo, Barclays, and Shell. The business council will serve as a platform to assess the impact of the economic climate on businesses and foster collaboration between the government and industry.

GBP

Sterling is well bid against most major currencies overnight. Today, we are tentatively expecting to receive the results of the 30-year bond auction from the UK Debt Management Office. This report will provide insights into the average yield on the 30-year bond that the government sold at auction, as well as the bid-to-cover ratio, which indicates bond market liquidity and demand. The bid-to-cover ratio serves as a measure of investor confidence. Since there are no forecasted figures available for this report, we eagerly await the actual reporting figures as they are unveiled. British grocery inflation experienced its sharpest decline since its peak in March this year, easing for the fourth consecutive month in July. According to industry data from Kantar, annual grocery inflation dropped from 16.5% in June to 14.9% in the four weeks up to July 9. This provides some relief for cash-strapped consumers grappling with high prices.

EUR

The Euro is stronger against the Dollar and weaker against Sterling this morning. Today, we are tentatively expecting to receive the EU Economic forecasts for the month from the European Commission. This report encompasses economic projections for EU member states for the upcoming two years. The forecasts play a vital role as they serve as the European Commission’s foundation for assessing the economic performance and trends of EU member states, especially concerning potential austerity measures and other compelled spending cuts. In other news, The French government will increase regulated household electricity prices by 10% from August, but this will be the only price hike until February 2024. The 10% increase is significantly lower than the 74.5% increase recommended by the French Energy Regulatory Commission.

USD

The Dollar is weaker than most major currencies in the early morning trade. Today, the US Census Bureau will release the Core Retail sales report for the month, measuring the total value of retail sales (excluding automobile sales). The recent reports have displayed considerable volatility, as the forecasted figures significantly differed from the actual results. For this month, the current forecast stands at +0.4%; and it remains to be seen if that projection will remain stable. Later today, we will also receive the monthly report on Industrial Production levels from the Federal Reserve. This report gauges the fluctuations in the overall inflation-adjusted value of output generated by manufacturers, mines, and utilities. The recent reporting has shown a varied performance, with a greater number falling below the projected figures rather than surpassing them. As for this month, the current forecast stands at 0%, so it remains to be seen if the situation will remain stable.

Markets

Bonds rallied for a second day as traders bet global central banks are nearing the end of an aggressive streak of rate increases. European equities found firmer footing Tuesday after starting the week with the steepest losses in more than a week, with healthcare and financial services leading a modest gain in the Stoxx 600 index. Italian bonds led a rally across the Eurozone. Hopes are rising that a reprieve in inflation will pave the way for central banks to step back from a tightening regime that’s spurred the fastest pace of hikes in four decades. Consumer price index reports are due out of the Eurozone and UK Wednesday. Last week’s data showed US price pressures cooled more than economists had forecast.

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

10:00 a.m.: ECB’s Villeroy speaks
2:30 p.m.: US June Retail Sales
3:15 p.m.: US June Industrial Production
4:00 p.m.: Fed’s Barr and Gibson speak

Corporate Events

Earnings include BofA, Morgan Stanley, Charles Schwab, BNY Mellon, Western Alliance, PNC Financial Services, Lockheed Martin, Prologis, Omnicom, Ocado

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