Morning Report

November 09, 2023

“The focus is again on the US dollar today as markets set their eyes on unemployment claims and a speech from Federal Reserve Chair Powell. We expect significant volatility in sterling tomorrow morning however, with the release of a key economic growth report.”

Tim Hallinan – Trading Director


Main Headlines

The European Union has recommended to invite Kyiv to begin membership talks in what Ukrainian President Volodymyr Zelenskiy hailed as a ‘historic step’. The talks are proposed to commence once Kyiv fulfils the remaining conditions related to tackling corruption, adopting a lobbying law in line with EU standards, and reinforcing national minority safeguards. This move comes amid Ukraine’s ongoing struggle against Russia’s large-scale invasion since February 2022.

The Financial Services Compensation Scheme (FSCS) in the UK is projecting a levy of £415 million ($510 million) against financial firms to cover claims for redress in the 2024/25 period. This amount is higher than the previous year, mainly due to larger surpluses carried over from the 2022/23 financial year, which reduced the 2023/24 levy to £270 million.


Sterling firmed against the dollar yesterday afternoon, as investors gear up for GDP and output data early tomorrow. Bank of England Governor Andrew Bailey said in a speech yesterday that the global economy is experiencing fragmentation, in comments on financial stability, but refrained from discussing monetary policy, which is the more immediate concern for FX. A survey of chartered surveyors also indicated this morning that house prices continue to fall, and BoE Chief Economist Huw Pill is due to speak again this morning. The firm focus for sterling, however, is the ONS’ GDP report tomorrow that includes September and Q3 GDP growth, construction output, industrial production, and business investment among other indicators. The UK economy is expected to have been broadly stagnant in Q3, down from weak growth in the previous quarter. Significant sterling weakness is likely to require either a sharp downturn or a signal that one is coming, given that small contractions are unlikely to prompt the Bank of England to cut rates earlier.


The euro closed out yesterday in the green against the dollar and sterling as ECB speakers pushed back against early rate cut expectations. The decline in euro area retail sales decelerated to -0.3% in September from -0.7% the previous month, in a bittersweet data release on contracting consumer spending yesterday morning. ECB Vice President Luis de Guindos also warned that core inflation remains elevated and sticky, resisting the 80+bps of rate cuts priced in for 2024. Today, the ECB Economic Bulletin will detail the statistical data that prompted the latest decision to pause on interest rates, and President Christine Lagarde speaks later this afternoon.


The dollar index has been stuck in a new, weaker trading range for the last two days, with sovereign yield moves and a series of Federal Reserve speakers unable to spark the greenback into life. Chair Powell failed to shift markets yesterday when he avoided the topic of monetary policy, leaving markets waiting for his next appearance this evening on a panel discussion about ‘monetary challenges’. The US Treasury 10-year yield slipped below 4.5% early this morning, a more than 0.5% slide from its >5% peaks last month, as markets price in more and earlier rate cuts in 2024. Financial markets now imply an 18% chance that rates are cut as soon as March and 50% by May. The weekly jobless claims print this afternoon is expected to be stable on last month in a still tight labour market, with 218k new claims.


Stocks globally made gains, buoyed by a strong performance on Wall Street. Euro Stoxx futures rose 0.2%, continuing the positive trend in Asia where a regional shares gauge climbed 0.5%. The S&P 500 recorded its eighth consecutive advance on Wednesday, marking its best run since November 2021. US contracts remained relatively unchanged.

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

9:00 a.m.: ECB’s Villeroy speaks
9:10 a.m.: ECB’s Lane speaks
9:30 a.m.: Riksbank Financial Stability Report
9:30 a.m.: BOE’s Pill speaks
10:00 a.m.: ECB publishes economic bulletin
2:30 p.m.: US Initial Jobless Claims
3:30 p.m.: Fed’s Bostic and Barkin speak
4:00 p.m.: Portugal’s president meets his advisory council
5:00 p.m.: Riksbank’s Thedeen speaks
5:00 p.m.: Fed’s Barkin speaks
6:00 p.m.: SNB’s Moser speaks
6:00 p.m.: Fed’s Paese speaks
6:15 p.m.: SNB’s Schlegel speaks
6:30 p.m.: ECB’s Lagarde speaks
8:00 p.m.: Fed’s Powell speaks

Corporate Events

Earnings include AstraZeneca, Sony, Petrobras, Honda


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