June 7, 2023

“EURUSD remains at a lower level. The decline is influenced by a strengthening US Dollar, which is driven by a cautious market sentiment. Additionally, the pair is weighed down by conflicting data on German Industrial Production. Market participants are now closely observing remarks from the ECB later today.”

Tim Hallinan – Trading Director

Main Headlines

The US Securities and Exchange Commission (SEC) filed a lawsuit against cryptocurrency platform Coinbase yesterday, marking the second lawsuit in as many days against a major crypto exchange. This represents an intense crackdown on the industry and has the potential to significantly transform a market that has largely operated without regulation. If successful, these lawsuits could establish the SEC’s authority over the crypto industry, which has long argued that tokens are not securities and should not fall under the SEC’s regulatory oversight.

British Prime Minister Rishi Sunak plans to discuss aligning economic ties with the United States on par with their defence and security cooperation during his meeting with President Joe Biden this week. As Britain has exited the European Union, it aims to strengthen its alignment with Washington to navigate an increasingly volatile global landscape shaped by China’s rise, Russia’s aggression, and the advancements in Artificial Intelligence. Sunak is scheduled to arrive in Washington later today.

GBP

Sterling is weaker than most major currencies in the early morning trade. According to mortgage lender Halifax, British house prices experienced an annual decline in May for the first time in 11 years, coinciding with an increase in mortgage rates by the country’s largest provider. The average property price fell by 1.0% compared to May of the previous year, marking the first year-on-year decrease since December 2012. Prices remained unchanged on a monthly basis compared to April, when they had fallen by 0.4%. Kim Kinnaird, director of mortgages at Halifax, noted that cooling demand and anticipated higher interest rates are likely to exert further downward pressure on house prices.

EUR

Euro is stronger against Sterling and weaker against the Dollar this morning. The European Union is considering implementing a mandatory ban on member states using companies deemed to pose security risks in their 5G networks, including Huawei. Currently, only a third of EU nations have restricted Huawei from critical components of their 5G systems, following recommendations from Brussels. In the UK, central government departments will be instructed to remove surveillance equipment manufactured by Chinese firms, including Dahua and Hikvision, from sensitive locations.

USD

The Dollar is well bid against most major currencies overnight. The US Dollar is consolidating its previous week’s losses, experiencing modest gains amid a relatively inactive Asian trading session. The greenback’s strength against major currencies is supported by sluggish markets and the ability of US policymakers to avert a “catastrophic” default. These developments are increasing speculation about the possibility of the Federal Reserve raising interest rates in July, if not in June, further driving movements in the bond market.

Markets

European stocks opened with mixed results this morning, reflecting subdued sentiment and a lack of clear market direction. The pan-European Stoxx index initially rose by 0.1% at the market opening but quickly turned negative, with various sectors experiencing minor gains and losses. Overnight, US stock futures remained flat after the S&P 500 reached its highest closing level of 2023.

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

8:00 a.m: Germany April Industrial Production
8:45 a.m.: France April Trade Balance
9:00 a.m.: OECD publishes economic outlook
9:50 a.m.: ECB’s Guindos speaks
10:00 a.m.: Italy April Retail Sales
10:30 a.m.: ECB’s Knot speaks
11:00 a.m.: Greece 1Q GDP
2:00 p.m.: ECB’s Vujcic speaks
2:30 p.m.: US April Trade Balance
3:00 p.m.: Poland central bank’s Glapinski speaks
4:00 p.m.: Canada Rate Decision
Rishi Sunak travels to Washington

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