Morning Report

May 22, 2023

“The dollar extended its decline against the yen and euro this morning, as Federal Reserve Chair Jerome Powell indicated a preference for slowing rate hikes. European shares had a cautious start today, while Wall Street futures struggled, leaving traders on edge as US debt ceiling negotiations approached crunch time after stalling last week.”

Tim Hallinan – Trading Director

Main Headlines

Joe Biden’s optimistic prediction of improved US-China relations was quickly contradicted by the tense reality between the two nations. Shortly after the US president’s remarks at the G7 summit in Japan, China issued an order for a number of its infrastructure companies to cease purchasing from Micron, a US chipmaker. This move emphasized the significant challenges involved in stabilizing US-China relations, especially considering the critical statements made by Biden and other leaders of advanced economies during the summit in Hiroshima. Although they acknowledged the importance of cooperation with China, the summit’s communique provoked an angry response from Beijing, resulting in the summoning of Japan’s ambassador to China to express their protest.

Bank of England officials are hopeful that the relationship between rising prices and wages will soon ease, as upcoming official figures are expected to reveal a significant drop in the headline inflation rate. The central bank anticipates a nearly 2-percentage-point decrease in the annual consumer price inflation rate, declining from 10.1% in March to 8.4% in April. Their projections suggest that the inflation rate will reach their 2% target by late 2024 or early 2025. While prices would still increase rapidly, the annual basis of the increase would be less pronounced compared to the past year. Officials are optimistic that this declining inflation rate will discourage companies from raising prices or agreeing to generous wage settlements.


Sterling is weaker than most major currencies in the early morning trade. Over 100 college leaders have raised concerns about proposed changes to vocational training in England, warning that it could leave thousands of school leavers without access to further education at age 16 due to a lack of a comprehensive implementation plan by the government. Plant and flower growers in the UK have also expressed their worries, as new post-Brexit border checks could adversely affect the gardening industry by increasing costs and reducing options for customers. Labour leader Sir Keir Starmer will outline his party’s plans to revitalize the National Health Service (NHS), aiming to reduce waiting times and improve outcomes for cancer, heart disease, and suicide if his party wins the next general election.


Euro is stronger against sterling and weaker against the dollar this morning. Greece’s Prime Minister Kyriakos Mitsotakis secured a decisive victory over his main rivals, significantly increasing his centre-right party’s share of the vote. While falling just short of an outright majority, this unexpected outcome strengthens his position. The European Union has confirmed its intention to proceed with joint purchases of hydrogen and critical raw materials after a successful initial attempt at aggregated gas purchases, which saw demand from gas buyers matched with potential suppliers for 10.9 billion cubic meters. Putin has declared a major victory, claiming that Russian forces have captured the eastern city of Bakhmut despite Kyiv’s insistence that the battle is not yet over, marking his first significant success since the early days of the Ukraine invasion.


The dollar is well bid against most major currencies this morning. US President Joe Biden and House Republican Speaker Kevin McCarthy are scheduled to meet on Monday to discuss the debt ceiling. Both leaders had a positive phone call on Sunday as President Biden returned to Washington. In early April, China initiated an investigation into cybersecurity risks associated with Micron, a major American memory chip manufacturer, leading to the banning of certain Micron product sales. This decision is widely seen as part of the ongoing retaliatory actions in the economic competition between the US and China, which are increasingly impacting the interconnected global tech supply chain.


Equity markets started the week on a hesitant note as President Joe Biden and Republican House Speaker Kevin McCarthy prepared to meet Monday in a bid to iron out road blocks in debt-ceiling negotiations. Talks have whipsawed between progress and deadlock for days as time runs out to reach a deal. Stocks gave up gains on Friday after Republicans temporarily walked out. Treasury Secretary Janet Yellen said Sunday the chances are “quite low” that the US can pay all its bills by mid-June, underscoring the urgency of the situation.

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

8:00 a.m.: Denmark May Consumer Confidence
10:00 a.m.: Poland April Jobs, PPI
10:45 a.m.: ECB’s Vujcic speaks
11:00: a.m.: ECB’s Guindos speaks
1:30 p.m.: ECB’s Holzmann speaks
2:30 p.m.: Fed’s Bullard speaks
2:30 p.m.: Riksbank’s Floden speaks
3:00 p.m.: Israel Rate Decision
4:00 p.m.: Euro-Area May Consumer Confidence
4:15 p.m.: ECB’s Villeroy and Lane speak
5:05 p.m.: Fed’s Bostic, Barkin and Daly speak
7:30 p.m.: ECB’s De Cos speaks
Middle East Petroleum & Gas Conference in Dubai

Corporate Events

Earnings include Ryanair, Zoom, HEICO
JPMorgan hosts its investor day in New York

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