Morning Report

May 31, 2023

“The US debt limit bill narrowly passed the House Rules Committee by a vote of 7-6, with the CBO estimating it would reduce deficits by $1.5 trillion over a decade. Later today, the next hurdle will be the vote by the full House of Representatives. Additionally, traders will look to comments from BoE’s Mann today for any indication on the future path they will take.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Legislation negotiated by President Biden and House Speaker McCarthy to raise the $31.4 trillion U.S. debt ceiling and implement new federal spending cuts cleared a crucial hurdle yesterday. It advanced to the full House of Representatives for debate and an expected vote on Wednesday. The House Rules Committee voted 7-6 in favour of approving the rules for the bill, despite two committee Republicans opposing it. The bill now moves to the Senate once it receives approval from the House and Congressional approval is required by June 5 to prevent the Treasury Department from running out of funds and facing the possibility of being unable to meet its debt obligations for the first time in U.S. history.

Next week, British Prime Minister Rishi Sunak is scheduled to meet with U.S. President Joe Biden to discuss enhancing economic relations and ensuring continued military support for Ukraine in its conflict with Russia. Sunak will be visiting Washington on Wednesday and Thursday for meetings with Biden, members of Congress, and U.S. business leaders. However, Sunak’s spokesperson stated on Tuesday that there won’t be any discussions regarding a formal free trade agreement. In other news, Despite Britain’s highest inflation in four decades, company profits last year, excluding oil and gas extractors, did not see a significant boost. The average net rate of return on capital employed by British companies not involved in oil and gas extraction was 9.5% in 2022, the lowest since 2011 and down from 10.0% in 2021. The Bank of England, however, has found limited evidence linking excessive company profits to high inflation, in contrast to concerns from eurozone central bankers.


Sterling is stronger against the Euro and weaker against the Dollar this morning. A survey conducted this morning revealed that sentiment among British businesses declined in May for the first time in three months. Despite some signs of resilience in the economy, firms expressed less optimism about both the economy and their trading prospects. The Lloyds Bank Business Barometer fell to 28% in May, a decrease from April’s 33%. This decline, the first since February, is in line with the survey’s long-term average. Later today we will be hearing from Catherine Mann, a member of the Bank of England’s Monetary Policy Committee, who will be speaking at the Pictet Family Forum in Zurich. Her speech will cover central banks, inflation, and monetary policy. These public engagements by committee members often involve subtle hints about future monetary policy and as a result, market volatility can be observed during these events.


The Euro is weaker than most major currencies in the early morning trade. German unemployment in May showed a stronger labour market resilience than anticipated, with a smaller-than-expected rise. The number of people out of work increased by 9,000, reaching 2.573 million, while analysts had predicted a larger rise of 15,000. The seasonally adjusted jobless rate remained steady at 5.6%, reflecting the challenging economic conditions. “Despite a weak economy, the labour market is steady overall,” said Daniel Terzenbach, head of the regions at the Labour Office. In other news, Italy’s economy expanded by 0.6% in the first quarter, surpassing the initial estimate of a 0.5% increase in GDP, driven by robust domestic demand. On a year-on-year basis, GDP for January-March was revised up to 1.9% from the previous estimate of 1.8%. However, the country experienced a quarter-on-quarter decline in the fourth quarter. Prime Minister Giorgia Meloni’s government is also grappling with challenges in meeting the European Commission’s policy conditions for the disbursement of COVID-19 recovery funds aimed at supporting growth.


The Dollar is well bid against most major currencies overnight. In May, U.S. consumer confidence reached a six-month low attributed to a weaker labour market outlook. Nevertheless, there was an increase in households planning to make significant purchases, which could contribute to economic growth. The decline in confidence primarily affected consumers aged 55 and older, as well as households earning between $50,000 and $99,000 annually. Additionally, consumers anticipated inflation to stabilize at higher levels in the near future. In other news, the U.S. Congressional Budget Office stated that if the current debt ceiling bill is passed as is, it would reduce budget deficit projections by around $1.5 trillion over the next decade. This projection follows the recent debt ceiling agreement between President Joe Biden and Republican House Speaker Kevin McCarthy. The deal is set for a vote on Wednesday and includes provisions such as suspending the debt limit until Jan. 1, 2025, capping spending in the 2024 and 2025 budgets, reclaiming unused COVID funds, expediting energy project permits, and implementing additional work requirements for recipients of food aid.


China’s economic woes reverberated beyond the country’s domestic markets on Wednesday, with European and Asian stocks falling along with US equity futures, while bonds gained. Hawkish comments from Federal Reserve officials added to headwinds for stocks after a rally on Wall Street, fuelled by excitement over artificial intelligence, fizzled on Tuesday. Contracts on the S&P 500 and Nasdaq 100 were lower, while Treasury yields fell as traders reconsidered market pricing for a pause in monetary tightening. A gauge of the dollar gained for the first time in four days.

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

6:30 a.m.: Netherlands April Retail Sales
8:00 a.m.: Denmark April Unemployment, 1Q GDP
8:30 a.m.: ECB’s Muller speaks
8:45 a.m.: France May CPI, 1Q GDP
9:00 a.m.: ECB’s Villeroy speaks
9:00 a.m.: Turkey 1Q GDP
9:55 a.m.: Germany May Unemployment
10:00 a.m.: Italy 1Q GDP
10:00 a.m.: ECB Financial Stability Review
10:30 a.m.: ECB’s Visco speaks
11:00 a.m.: Italy May CPI
11:30 a.m.: Germany to sell bonds
12:00 p.m.: Portugal May CPI, 1Q GDP
2:00 p.m.: Germany May CPI
2:00 p.m.: South Africa April Trade Balance
3:15 p.m.: BOE’s Mann speaks
4:00 p.m.: US April JOLTS Job Openings
5:00 p.m.: SNB’s Jordan and BIS’s Carstens speak
6:00 p.m.: Russia April Industrial Output, Retail Sales

Corporate Events

Earnings include Crowdstrike, National Bank of Canada, Salesforce
AGMs for Exxon, Chevron, OMV


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