Morning Report

May 25, 2023

“The dollar reached a two month high this morning as credit rating agency Fitch placed the United States’ “AAA” debt ratings on a negative watch. Meanwhile, a final reading of German GDP showed a decline of -0.3% in the first quarter, indicating that the economy has entered a technical recession.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Fitch, the credit rating agency, has put the United States’ triple A rating under scrutiny for a possible downgrade as negotiations to resolve an imminent fiscal crisis continue without a resolution, just days before a potential default. In a statement released on Wednesday evening, Fitch stated that this action reflects the “growing political polarization that is impeding the achievement of a solution” regarding the debt ceiling. Although Fitch still anticipates a resolution to be reached, it acknowledged an increased risk that the government may fail to meet some of its financial obligations. The US Treasury emphasized the necessity for prompt bipartisan action by Congress to raise or suspend the debt limit and prevent an artificially created economic crisis.

Ofgem, the energy regulator, has reduced the price cap on household energy bills in the United Kingdom by £1,206 due to a decline in wholesale gas and electricity prices. Starting in July, the price cap for typical households will be lowered to £2,074 per year, in contrast to the £3,280 cap imposed over the past three months. This cap determines the maximum amount energy suppliers can charge customers on default tariffs, although the government has been subsidizing a portion of households’ bills since October. With the reduction in the price cap, government support will diminish, resulting in typical households paying approximately £426 less per year.


Sterling is stronger against euro and weaker against the dollar this morning. The pension fund of Kensington and Chelsea council is investing hundreds of millions of pounds in commercial real estate, a move that has drawn controversy, particularly as numerous global retirement funds are divesting or devaluing their real estate holdings. In an effort to appease the discontented life sciences industry, the UK government is directing investments towards mining health data and increasing domestic vaccine and drug manufacturing. It is expected that ministers will announce over £150 million in funding for the UK Biobank, quadrupling its research capacity to enhance scientists’ and pharmaceutical companies’ understanding of human biology.


Euro is weaker than most major currencies in the early morning trade. According to data from the statistics office, the German economy contracted in the first quarter of 2023 compared to the previous three months, officially entering a recession. Russian state-owned news agency TASS reported that the defence ministers of Russia and Belarus have signed a document outlining the deployment of Russian tactical nuclear weapons in Belarus. Russian customs records reveal that the United Arab Emirates has become a crucial trade hub for Russian gold since traditional export routes have been affected by Western sanctions related to Ukraine.


The dollar is well bid against most major currencies this morning. Florida Governor Ron DeSantis encountered a tumultuous start to his 2024 presidential election campaign when technical issues disrupted an online forum hosted by Elon Musk, the owner of Twitter, intended to showcase DeSantis’ suitability for the role. Western intelligence agencies and Microsoft revealed yesterday that a state-sponsored Chinese hacking group has been conducting espionage on various critical infrastructure organizations in the United States, including telecommunications and transportation hubs. Against a backdrop of escalating tensions with China, President Joe Biden has chosen General Charles Q. Brown as the top military officer.


US equity futures rallied, and European technology stocks jumped after a bullish sales forecast from Nvidia Corp. ignited gains in companies linked to the frenzy for artificial intelligence. Nvidia surged as much as 29% in after-hours trading after its forecast for surging revenue surprised even the most optimistic analysts on Wall Street, propelling the chipmaker to the cusp of a $1 trillion market value. Nasdaq 100 futures added 1.6% and chipmaker ASM International NV led gains in the Stoxx 600 Index.

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

8:00 a.m.: Germany 1Q GDP
8:45 a.m.: France May Manufacturing Confidence
9:00 a.m.: Spain April PPI
10:35 a.m.: SNB’s Maechler speaks
11:00 a.m.: ECB’s Guindos speaks
11:00 a.m.: ECB publishes 2022 annual report
11:40 a.m.: Riksbank’s Thedeen speaks
12:30 p.m.: ECB’s Nagel speaks
1:00 p.m.: Turkey One-Week Repo Rate
1:15 p.m.: ECB’s Villeroy speaks
2:30 p.m.: US Weekly Jobless Claims; 1Q GDP, Core PCE
3:30 p.m.: ECB’s Centeno speaks
5:45 p.m.: ECB’s De Cos speaks
6:30 p.m.: BOE’s Haskel speaks

Corporate Events

Earnings include RBC, TD Bank, Costco, Gap, Bed Bath & Beyond


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