Morning Report

July 28, 2023

“The Bank of England is anticipated to raise interest rates by 0.25% or possibly 0.5% next month, contingent on whether we are dealing with persistent inflation or a swift deceleration in price growth. Positive GDP and CPI reports from France and Spain have been received from the Eurozone, while we await the German CPI reporting with a forecast of 0.3%, watching for any emerging trends.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Bipartisan US lawmakers, led by Democratic Senator Cory Booker, seek to restrict farmland ownership to address corporate control. Concerns are rising over increased purchases by investors and foreign entities, impacting prices and national security. Booker’s Farmland for Farmers Act aims to bar most corporations, pension funds, and investment funds from acquiring or leasing farmland. In other news, the US Senate approved the fiscal 2024 National Defence Authorization Act (NDAA) with a record $886 billion in spending. The bill covers crucial matters, including a 5.2% pay raise for troops and support for Ukraine. It now faces a showdown with the Republican-led House of Representatives, which usually garners strong bipartisan support and has passed annually since 1961.

NatWest announced that Peter Flavel, the CEO of its private bank Coutts, will resign due to “ultimate responsibility” for mishandling the closure of Nigel Farage’s bank accounts, the former Brexit party leader. This decision is among the first actions taken by NatWest’s interim CEO Paul Thwaite, following the resignation of former CEO Alison Rose, who stepped down for the same reason. In other news, UK authorities are investigating defence ministry emails that were mistakenly sent to the wrong recipient. The messages intended for US military intelligence were instead received by Russian ally Mali due to an error in sending the emails. Ministry of Defence officials were attempting to contact the Pentagon with the domain name “.mil,” but accidentally sent the mails to Mali, which uses the domain name “.ml.”


Sterling is stronger against the Euro and weaker against the Dollar this morning. The Bank of England is expected to increase rates by 0.25% to 5.25% on August 3. However, there is a possibility of a repeat of June’s unexpected 0.5% hike, given that inflation remains a major concern compared to other developed economies. Investors are uncertain about the peak of BoE rates since June 22, as they try to determine whether Britain is facing a long-term inflation issue or if price growth will rapidly slow down like in other countries. In other news, British businesses expressed the least worry about their trading prospects in the coming month since February last year. Approximately 67% of companies reported some level of concern for their business in August, the lowest percentage since February 2022, coinciding with Russia’s invasion of Ukraine. The main concerns cited by businesses were inflation and declining demand for goods and services. In mid-July, around one in eight businesses reported worker shortages, with 38% of these firms stating that their staff had to work longer hours as a result.


The Euro is weaker than most major currencies in the early morning trade. Today we will be receiving a number of reports across the eurozone, with the French consumer spending, Flash GDP, and Preliminary CPI reports, the Spanish Flash CPI and GDP reports, and the German Prelim CPI report. The French and Spanish reporting have all already come in, with a very positive showing for all, either meeting their forecasts or exceeding the expectations for them.  The most important of these we are still waiting on, which is the German Prelim CPI monthly report, which measures the change in the price of goods and services purchased by consumers. The past few months reporting has been all over the place, and with the current forecast at 0.3% we will see if any trends emerge when the report is published.


The Dollar is well bid against most major currencies overnight. Later today we will be receiving the Core PCE Price Index reporting from the US Bureau of Economic Analysis. This report measures the change in the price of goods and services purchased by consumers (Excluding Food and Energy), and it is the Federal Reserve’s primary inflation measure. The last few months reporting has been mostly positive, with the actual numbers either meeting the forecast or exceeding them. The current forecasted figure is 0.2%, so we will see if this trend continues. We will also be receiving the Employment Cost index from the Bureau of Labour Statistics, which measures the change in the price businesses and the government pay for labour. The last few months of reporting has not shown any significant trends, so we will see if one emerges from this month, with the forecast currently sitting at 1.1%.


Bonds around the world retreated after the Bank of Japan, so far a holdout on ultra-loose monetary policy, widened its yield curve tolerance band. The move sent Japan’s 10-year yield to a nine-year high, and triggered big swings in the yen as investors debated the implications of the BOJ’s decision. Treasury 10-year yields were flat at 4%, having risen 13 basis points the previous day. In Europe, German and French yields rose, while yields on 10-year debt in Australia climbed as much as 20 basis points.

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

7:30 a.m.: France 2Q GDP
8:45 a.m.: France July CPI
9:00 a.m.: Spain July CPI, 2Q GDP
10:00 a.m.: ECB publishes Survey of Professional Forecasters
10:00 a.m.: ECB’s Simkus speaks
11:00 a.m.: Euro-area July Economic, Consumer Confidence
2:00 p.m.: Germany July CPI
2:30 p.m.: US 2Q Employment Cost Index
2:30 p.m.: US June Personal Income; PCE Deflator

Corporate Events

Earnings include NatWest, AstraZeneca, Air France-KLM, Amundi, Amadeus, AIB, CaixaBank, Hermes, Engie, Eni, Exxon, Colgate-Palmolive, P&G, T. Rowe Price


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