June 19, 2023

“The US dollar was in a state of uncertainty this morning as investors processed the outcomes of various central bank meetings that took place last week. The dollar index, which tracks the value of the US dollar against six major currencies, saw a small increase form it’s one-month lows on Friday. This week’s focus will be on the UK inflation date and the BoE rate decision.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US Secretary of State Antony Blinken is scheduled to have a meeting with Chinese President Xi Jinping today, concluding an uncommon and crucial visit to Beijing with the goal of preventing the numerous conflicts between the two powerful nations from escalating into a full-blown confrontation. Blinken’s encounter with Xi marks the first time a US secretary of state has met with the Chinese leader since 2018. This meeting holds the potential to facilitate a future summit between Xi and US President Joe Biden later this year. The talks did not yield significant progress in narrowing the differences between the two sides on various issues such as Taiwan, trade, human rights, the synthetic opioid fentanyl trade, or their approaches to the war in Ukraine.

Over the past month, asking prices for homes in the UK have remained relatively stable despite turbulent mortgage market and increasing borrowing costs. Data from property website Rightmove reveals that new sellers listed their homes at an average price of £372,812 during the four-week period ending on June 10. This amount is £82 lower compared to the previous month, indicating a slight decline after five consecutive months of growth. Asking prices serve as a leading indicator of the confidence held by sellers and agents in the housing market. Since the beginning of this year, these prices had been rising as the property sector rebounded from the market instability caused by the tax-cutting “mini” Budget implemented in the autumn.

GBP

Sterling is well bid against most major currencies this morning. The Bank of England is set to raise interest rates for the 13th time in a row on Thursday. The base rate is predicted to climb from 4.5 percent to 4.75 percent, reaching its highest point since 2008. Speculation is also circulating among analysts that the Bank might even consider a further increase to 5 percent. Regarding rising mortgage costs, UK Chancellor Jeremy Hunt has made it clear that he will not offer any direct fiscal assistance to households grappling with this issue, even though it could have an impact on the prospects of the Conservative Party leading up to the next general election. The delivery of a £2.3 billion aid fund for Ukraine, which was generated from the sale of Chelsea FC, has encountered delays due to disagreements regarding the allocation of the funds.

EUR

Euro is weaker than most major currencies in the early morning trade. Chancellor Olaf Scholz faces a delicate task this week during German Chinese government consultations in Berlin. He must strive to maintain positive relations with Germany’s largest trading partner while also adhering to a G7 commitment to “de-risk” from Beijing. A recent proposal to extend subsidies for coal plants has disrupted the plans of European Union countries to approve a reform of the bloc’s power market on Monday. This reform was designed to shift the electricity system towards cleaner energy sources. Spain’s conservative People’s Party is expected to win the most seats in the lower house of parliament in the upcoming national election, surpassing the ruling Socialist Workers’ Party by a wide margin.

USD

The dollar is stronger against euro and weaker against sterling this morning. Transportation Secretary Pete Buttigieg emphasized the need for the United States to take measures to narrow China’s lead in the production of batteries used for electric vehicles. He stated that developing refining capacity for key materials is an “addressable” issue. Buttigieg underscored the importance of establishing domestic and international relationships for sourcing raw materials and refining capacity. Goldman strategists have expressed the belief that inflation in the US will not subside as quickly as currently reflected in market expectations. They argue that investors may be assuming that significantly slower economic growth will result in a rapid reduction of price pressures.

Markets

Global stocks fell Monday, striking a more cautious note after Wall Street’s powerful second-quarter rally lost steam at the end of last week. Chemicals and construction firms paced declines in Europe, while telecom stocks outperformed. Among the biggest individual movers, Sartorius AG slumped 15% after issuing a bigger-than-expected profit warning. In Asia, disappointed hopes for further stimulus pushed down Chinese tech companies.

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

10:00 a.m.: ECB’s Simkus presents economic forecasts
10:30 a.m.: Portugal April Current Account Balance
1:00 p.m.: ECB’s Lane speaks
1:40 p.m.: ECB’s Schnabel speaks
3:00 p.m.: ECB’s Villeroy speaks
4:00 p.m.: US June NAHB Housing Market Index
US public holiday

Corporate Events

Earnings include Vantage Towers

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