Morning Report

March 3, 2023

“The US Dollar remains weak after a brief recovery yesterday, as the yield on the 10-year US Treasury bond falls closer to 4%. Later today, ISM will publish the US Services PMI report for February, and before the weekend, several FOMC members, such as Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman, will be giving speeches, which will be closely watched.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Fed Governor Christopher Waller has stated that a string of strong economic data in the US could force the central bank to raise rates higher than the projected range of 5.1%-5.4% by the majority of Federal Reserve policymakers in December. He cites robust consumer demand, a strong labor market, and stubbornly persistent price pressures as reasons to question the extent of progress made in the fight against inflation. Waller further stated that if upcoming reports show hiring has slowed and inflation resumes its decline, he would support raising the target range for the federal funds rate to a projected terminal rate between 5.1% and 5.4%.

Boris Johnson criticized Rishi Sunak’s new post-Brexit deal with the European Union for Northern Ireland, accusing the prime minister of allowing the bloc to retain too much influence in the United Kingdom. Sunak had recently eased trade restrictions in the British-run province by partially unwinding an earlier arrangement made by Johnson, which had introduced checks and paperwork on goods arriving from the rest of Britain. Johnson admitted fault for not realizing how “onerous” the checks would be. Following Johnson’s remarks, Sterling lost ground against the US dollar and euro, extending earlier losses.



Sterling is well bid against most major currencies overnight. There is growing hope that the UK government may reverse plans to lift the cost of energy for households in April. The Energy Price Guarantee currently limits the cost of gas and electricity, and it is set to rise to £3,000 per year in April. There have been many calls for ministers to maintain current subsidies, and a Downing Street spokesperson has indicated that the plan to raise the Energy Price Guarantee to £3,000 per year is being re-examined.



Euro is stronger against the dollar and weaker against sterling this morning. European Central Bank Governing Council member Pierre Wunsch has stated that the ECB could consider raising its key interest rate to as high as 4% if underlying inflation in the euro zone remains persistently high. This comes as underlying inflation in the 20-nation euro zone, excluding volatile energy, food, alcohol, and tobacco prices, has risen to 5.6% in February. Wunsch says that if core inflation remains at the current level of above 5% and there are no clear signals that it is going down, the ECB will have to take further action.



The dollar is weaker than most major currencies in the early morning trade. The Labor Department has reported that the number of Americans filing new claims for unemployment benefits fell again last week, pointing to sustained labor market strength. This adds to financial market fears that the Federal Reserve could keep hiking interest rates for longer. This marks the seventh straight week that claims have remained below 200,000, dropping 2,000 to a seasonally adjusted 190,000 for the week ended Feb. 25.



European markets have opened higher this morning, with the pan-European Stoxx 600 index up 0.55% at 8:40 a.m. London time. Mining stocks have added 1.5%, and tech has gained 1.1%. However, media stocks were among the few sectors to post losses, down 0.44%. Asia-Pacific markets were mostly higher this morning, while US stock futures nudged lower. US Stocks rose yesterday in an afternoon rally as traders tried to shake off concerns over higher interest rates. The S&P 500 gained 0.76%, and the Nasdaq Composite climbed 0.73%.


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

8:00 a.m.: Germany Jan. Trade Balance
8:00 a.m.: Turkey Feb. CPI
8:45 a.m.: France Jan. Industrial Production
9:00 a.m.: ECB’s Holzmann Speaks
9:30 a.m.: ECB’s Guindos Speaks
10:00 a.m.: Euro-Area Feb. S&P Global PMIs
10:00 a.m.: Italy 4Q GDP
10:00 a.m.: ECB’s Vasle and Muller Speak
10:30 a.m.: UK Feb. PMIs
11:00 a.m.: Euro-Area Jan. PPI
12:00 p.m.: BOE’s Hauser Speaks
3:45 p.m.: US Feb. PMIs
4:00 p.m.: US Feb. ISM Services Index
6:00 p.m.: ECB’s Wunsch Speaks


Corporate Events

Earnings include Lufthansa, Pearson, Rightmove


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