Morning Report

June 15, 2023

“Yesterday the Federal Reserve decided to pause interest-rate hikes, as expected, but indicated that further hikes will be needed in the near future. Today, we wait for the ECB’s interest rate decision, with a 25bp hike widely expected by the market. US Retail Sales data could add to the volatility.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The Federal Reserve paused its interest-rate hikes but anticipates higher borrowing costs due to persistent inflation and a strong labour market, as stated by Chair Jerome Powell in a press conference. Powell faces the challenge of explaining the seemingly contradictory policies of keeping rates unchanged after ten consecutive hikes while signalling the likelihood of at least two more increases this year, potentially in July. Former U.S. President Donald Trump pleaded not guilty to federal criminal charges of unlawfully retaining national-security documents and providing false information. The plea was made in a Miami federal court before U.S. Magistrate Judge Jonathan Goodman. This initiates a legal battle that will likely unfold in the coming months as Trump aims to reclaim the presidency in the November 2024 election. Legal experts anticipate that the trial may not take place for at least a year.

The UK’s £1.5 trillion mortgage market is experiencing turmoil due to disruptions in money markets, creating concerns about a potential housing decline and financial difficulties for homeowners similar to the late 1980s. Lenders are urgently adapting their home loan offerings in response to rising funding costs, influenced by the anticipated interest rate hikes by the Bank of England in its efforts to combat persistent inflationary pressures. Additionally, the average mortgage rate for new two-year mortgage deals rose to 5.90% on Wednesday, as indicated by property data provider Moneyfacts. This rate marks the highest level since December of the preceding year, following the mini budget. In other news, The UK’s FTSE 100 rose due to higher metal prices, benefiting mining stocks. However, recruitment firms on the midcap index, including Robert Walters, were impacted by a profit warning. Investors awaited the interest rate decision from the U.S. Federal Reserve, while the European Central Bank’s decision was anticipated on Thursday. British equities have been experiencing limited fluctuations amid concerns over Bank of England rate hikes and commodity price volatility.


Sterling is weaker than most major currencies in the early morning trade. The Bank of England plans to conduct an external review of its economic forecasting during uncertain times, as revealed in a letter from a parliamentary committee. David Roberts, the chair of the Bank’s Court of Directors, confirmed the decision and mentioned ongoing discussions with the Governor regarding the review’s approach, including Terms of Reference and resource allocation. Criticism from certain members of the Treasury Committee stems from the Bank’s inability to accurately forecast last year’s inflation surge in terms of scale and duration. Later today, Bank of England Deputy Governor Jon Cunliffe will participate in a moderated discussion titled “Central banks and the future of payments” at the Politico Global Tech Summit in London. This event holds significance as members of the Bank of England Monetary Policy Committee (MPC) vote on key interest rates, and their public engagements often provide subtle hints about future monetary policy. Therefore, we will be attentively listening to gain insights from this discussion.


The Euro is stronger against Sterling and weaker against the Dollar this morning. Today, we await the release of the European Central Bank’s Main Refinancing Rate report, which determines the interest rate for primary refinancing operations, crucial for banking liquidity. Published eight times a year, it holds significant importance as short-term interest rates impact currency valuation. Notably, the last five reports accurately predicted outcomes, raising curiosity about future trends. Also, we will receive Lagarde’s monetary policy statement, a vital communication tool for investors regarding monetary policy. It reveals the interest rate decision, provides commentary on the influencing economic conditions, and crucially discusses the economic outlook, offering insights into future decisions. Traders will be watching intently for any information on future pathways.


The Dollar is well bid against most major currencies overnight. Later today, we will receive the Empire State Manufacturing Index from the Federal Reserve Bank of New York. This survey assesses the general business conditions and measures the diffusion index based on responses from approximately 200 manufacturers in New York state. As a leading indicator of economic health, it reflects the rapid responsiveness of businesses to market conditions and changes in sentiment, serving as an early signal for future economic activity. In addition to this, the monthly Core Retail Sales report from the US will be released. This report measures the change in total retail sales value, excluding automobile sales. Automobile sales, although accounting for about 20% of Retail Sales, are known to be volatile and can distort the underlying trend. The Core data is considered a more reliable indicator of spending trends. Notably, out of the last five reports, three have fallen below the forecasted values, making it interesting to observe whether this trend will persist or if a new deviation will emerge.


Stocks retreated on Thursday, with sentiment subdued by the Federal Reserve’s hawkish tone and as weak economic data from China weighed on resources companies. Mining and energy stocks led declines in Europe after figures showed Chinese economic activity softened in May, while investors prepared to hear the European Central Bank’s next policy announcement in the fight against inflation. Futures for US benchmarks edged lower after Chairman Jerome Powell said nearly all Fed officials expected it would be appropriate to raise interest rates “somewhat further” in 2023 after Wednesday’s pause.

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

8:45 a.m.: France May CPI
9:00 a.m.: ECB’s Nagel speaks
10:00 a.m.: Spain April Trade Balance
10:00 a.m.: Poland May CPI
11:00 a.m.: Euro-Area April Trade Balance
11:00 a.m.: Greece 1Q Unemployment
1:00 p.m.: Ukraine Rate Decision
2:15 p.m.: ECB Rate Decision
2:30 p.m.: US May Retail Sales
2:45 p.m.: ECB’s Lagarde speaks
3:15 p.m.: US May Industrial Production
5:35 p.m.: BOE’s Cunliffe speaks
6:00 p.m.: ECB’s Villeroy speaks
6:00 p.m.: Russia 1Q GDP
NATO defense ministers in Brussels through Friday
IMF and Norges Bank conference on economic policy

Corporate Events

Earnings include Adobe, Jabil, Kroger, Halma
London Tech Week through Friday
VIVA Technology event in Paris through Saturday


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