Morning Report

May 19, 2023

May 19, 2023

“Today’s report shows UK consumer confidence rising in May, marking the fourth consecutive monthly improvement. Additionally, speeches by key figures from the US Federal Reserve, including Williams, Bowman, and Powell, and the ECB’s Lagarde and De Cos, will offer valuable insights into the near-term outlook for the Dollar and Euro inflation, as well as overall monetary policy for both ECB and the Fed.”

Sam Cornford, Partner – Head of Trading

Main Headlines

According to a White House official, Democratic negotiators informed President Joe Biden on Friday that they are making steady progress in discussions with Republicans to prevent a US default. Biden received an update on the talks from aides to Republican House Speaker Kevin McCarthy while he was in Japan for the G7 summit. Considering the ongoing negotiations, Biden has decided to cut short his trip to Asia, cancelling planned stops in Papua New Guinea and Australia aimed at countering China’s influence in the region. He is now scheduled to return home on Sunday to continue the negotiations. However, the Freedom Caucus, a significant Republican faction, threatens to block the debt ceiling agreement in the House unless it includes substantial spending cuts. This opposition could hinder timely bill passage, risking the economy due to the Treasury Department’s warning of potential payment issues by June 1. The Freedom Caucus’s stance poses a risk to the economy, which cannot afford further delays.

Britain has imposed new sanctions on Russia, targeting companies involved in the theft of Ukrainian grain and the transportation of Russian energy. This move is part of a broader initiative by the United States, Britain, and other G7 nations to impose sanctions and export controls on Russia due to the ongoing conflict with Ukraine. A total of 86 individuals and entities have been sanctioned. The goal is to crackdown on “shady individuals and entities” involved in these activities. In other news, The UK government revealed a long-awaited strategy on Friday, pledging £1 billion ($1.26 billion) of investment in the semiconductor sector. The strategy aims to enhance the domestic industry and strengthen chip supply chains, with a particular focus on Britain’s role in semiconductor design. This initiative is part of the efforts by the newly formed Department for Science, Innovation, and Technology (DSIT) to support various industries, from automobiles to smartphones and washing machines, which heavily rely on semiconductors.


Sterling is stronger against the Dollar and weaker against the Euro this morning. Despite double-digit inflation, British consumer confidence has reached its highest level in 15 months, increasing for the fourth consecutive month. According to a survey conducted by market research firm GfK, households are expressing a more positive outlook on the economy and their own financial situations. The headline confidence index rose from -30 in April to -27 in May, surpassing the record low of -49 in September last year. This increase brings the index to its highest point since February 2022, aligning with economists’ predictions. In other news, the UK’s main stock indexes rose today, driven by a 15-month high in British consumer confidence and expectations of resolving the US debt ceiling issue. The FTSE 100 reversed the week’s trend with a 0.2% increase. Industrial metals miners and energy firms gained 0.6% and 1.3% respectively, benefiting from higher commodity prices linked to progress in raising the US debt ceiling, expected to be finalized by Sunday. A recent survey showed optimistic consumer outlook, reaching a 15-month high in May, reflecting positive sentiments about the economy and personal finances.


The Euro is well bid against most major currencies overnight. European Central Bank President Christine Lagarde is scheduled to deliver a speech later today. As the head of the ECB, which holds authority over short-term interest rates, Lagarde’s influence on the euro’s value surpasses that of any other individual. Traders will carefully analyse her speech as it frequently serves as a source of subtle indications about future monetary policy. Titled “Post-pandemic challenges: High inflation, high indebtedness, and financial stability,” her session is expected to provide valuable insights into the ECB’s forthcoming monetary policy decisions.  In other news, the European financial services industry jobs map has swiftly changed this year due to a lack of deals, turbulence in the banking sector, and the aftermath of Credit Suisse’s collapse. One noticeable effect is that banks in the region are strategically pursuing top talent affected by the imminent acquisition of Credit Suisse by UBS. As a result, recruitment firms are receiving an increased number of resumes from finance professionals worried about potential displacement by these new hires.


The Dollar is weaker than most major currencies in the early morning trade. Today, there are several speeches scheduled from key figures of the US Federal Reserve, including NY Fed President John Williams, Fed Governor Michelle Bowman, and Chairman Jerome Powell. As representatives of the Federal Reserve, which has control over short-term interest rates, their impact on the value of the Dollar is significant. Traders will thoroughly analyse their speeches, as they often provide subtle clues about future monetary policy decisions. In other news, the number of Americans filing new unemployment benefit claims dropped more than anticipated, indicating a continued tightness in the labour market. The significant decrease in weekly jobless claims, reported by the Labour Department on Thursday, reversed the previous week’s surge that had reached the highest level since October 2021. The previous increase was primarily attributed to an unusual rise in applications for unemployment insurance in Massachusetts.


Germany’s benchmark DAX Index climbed closer to an all-time high as a broad rally swept up European stocks. Signals that US politicians may reach a debt-ceiling deal as soon as this weekend have lifted markets across the board and given investors a renewed sense of confidence. The S&P 500 hit a nine-month high on Thursday and oil is heading for its best week since mid-April. The Nikkei 225 closed at a 33-year peak. In a call early Friday from Japan, President Joe Biden told his negotiating team that he’s confident Congress will act in time to avoid a default, according to a White House official. House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer are making plans for votes in the coming days on a bipartisan deal.

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

8:00 a.m.: Germany April PPI
10:00 a.m.: ECB Publishes Economic Bulletin
11:45 a.m.: BOE’s Haskel speaks
2:45 p.m.: Fed’s Williams speaks
3:00 p.m.: Fed’s Bowman speaks
4:55 p.m.: ECB’s Schnabel speaks at the London School of Economics (and again at 6:00 p.m.)
5:00 p.m.: Fed’s Powell and former chair Bernanke speak
9:00 p.m.: ECB’s Lagarde and De Cos speak
G-7 leaders meet in Hiroshima through Sunday

Corporate Events

Earnings include Deere, Foot Locker, Catalent


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