Morning Report

November 03, 2023

“The Bank of England held rates at a 15-year high for the second consecutive month, but left the door open for further hikes in what is expected to be a long and slow battle against the highest inflation amongst advanced economies. Sterling has benefitted more, however, from a sliding dollar and a tentative improvement in investor risk appetite.”

Tim Hallinan – Trading Director


Main Headlines

Uber and Lyft have agreed to a combined settlement of $328 million to resolve claims made by New York’s Attorney General. The claims alleged that the ride-sharing companies systematically deprived drivers of their pay and benefits. Uber will pay $290 million, and Lyft will pay $38 million to settle the multi-year investigation. As part of the agreement, drivers will receive guaranteed minimum hourly rates, paid sick leave, and additional support to address their earnings and working conditions through notices and in-app chat support.

The UK’s domestic energy price cap is expected to rise more than initially predicted in January and is likely to increase again in April due to rising wholesale prices driven by geopolitical factors, according to analysts at Cornwall Insight. In January, the price cap is forecasted to rise to £1,923 a year for the average user, which is a 4.9% increase from the current £1,834 a year and higher than the previous forecast of £1,898 made in September. This potential price increase could put additional financial strain on households.


Sterling trades near a one-week high on a faltering dollar, but it has struggled to benefit from a hawkish Bank of England hold. The bank officially put itself in wait-and-see mode regarding further rate hikes, repeating familiar rhetoric about monitoring incoming data for further indications of persistent inflationary pressures. In its Monetary Policy Report, it forecasted that rates are likely set to remain at the 5.25% until Q4 2024, when inflation is expected to still be as high as 4.75% whilst economic growth remains flat. This would put the UK over a year behind the US and eurozone in terms of its inflation battle, especially considering euro area CPI fell sharply to 2.9% earlier this week. Ben Broadbent was also keen to stress that below-0% growth is not a critical or closely-watched threshold for the bank, suggesting that a significant deterioration in growth conditions would be required to tilt discussions towards rate cuts. Final revisions to the services PMI are due this morning and policymakers Pill and Haskel are set to speak later today.


The euro has broadly benefitted from external dynamics this week, making small gains against both the sterling and dollar. The final manufacturing PMIs made little impact when they were virtually unchanged yesterday, whilst French industrial output simply gave further confirmation to the stagflationary outlook as it fell -0.5% in September. The ECB’s Schnabel last night claimed that the ECB cannot close the door on further rate hikes and that the final leg of the return to 2% would take at least another year, although markets continue to fully price this possibility out. The consolidated eurozone unemployment rate is expected to remain steady at 6.4% this morning.


The Federal Reserve’s rate hold continues to weigh on the dollar, which is now set for a weekly decline. The markets have taken the slight dovish pivot and run with it this week, slashing probabilities for a December hike to below 20% and spurring a bond rally that has seen the 10-year yield – which represents expected rates over the period, plus a small premium for locking away money – tumble 30bps over only two sessions. A tentative risk-on rally has resulted, as the prospect of a peak in borrowing costs entices investors to increase the weight of riskier assets in their portfolios, such as equities and risk-sensitive currencies like AUD. This market direction will be tested this afternoon with a bundle of labour market data that includes wage growth, non-farm payrolls, and the unemployment rate. A surprise loosening in labour price pressures could give dollar bears the confidence to double down, but weakening will likely be limited, as job growth is expected to remain strong, and the greenback still retains a significant yield advantage.


European stock futures are trading higher, taking cues from a rally in Asian equities and currencies. Investors are showing optimism due to the expectation that the Federal Reserve’s tightening cycle may be nearing an end. The MSCI’s Asia benchmark gained over 1% and is on track for its best week in two months. Hong Kong’s stock gauges led the regional advance. In the US, equity futures have slipped due to underwhelming results from Apple Inc. Euro Stoxx 50 futures have ticked higher, with eurozone unemployment data expected to be released on Friday.

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

8:00 a.m.: Germany Sept. Trade Balance
8:00 a.m.: Turkey Oct. CPI
8:45 a.m.: France Sept. Industrial Production
10:00 a.m.: BOE’s Hauser speaks
10:30 a.m.: UK Oct. S&P Global Composite PMI
11:00 a.m.: Euro-Area Sept. Unemployment Rate
11:30 a.m.: ECB’s Centeno speaks
12:00 p.m.: ECB’s De Cos speaks
12:00 p.m.: UK sells bills
1:00 p.m.: Fed’s Barr speaks
1:15 p.m.: BOE’s Huw Pill speaks
1:30 p.m.: US Oct. Jobs Report
2:45 p.m.: US Oct. S&P Global Composite PMI
3:00 p.m.: US Oct. ISM Services
5:00 p.m.: BOE’s Haskel speaks
5:45 p.m.: Fed’s Kashkari speaks

Corporate Events

Earnings include BMW, Maersk, Swiss Re


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