Morning Report

November 15, 2023

“The currency markets saw a stellar move yesterday when the dollar plunged 1.5% against most major currencies on cooling CPI inflation. Easing UK price growth compounded its positive effect on investor risk sentiment this morning, leading to a surge in global stocks and risk-sensitive currencies such as NOK, SEK, and AUD.”

Tim Hallinan – Trading Director


Main Headlines

On Tuesday, the US House of Representatives approved a short-term spending bill with widespread bipartisan support, avoiding a government shutdown. The bill, extending government funding until mid-January, is now destined for the Senate, where leaders from both Democratic and Republican parties have expressed backing. The 336-95 vote marked a success for House Speaker Mike Johnson, who navigated resistance from some fellow Republicans in this pivotal vote early in his tenure.

In October, business insolvencies in England and Wales increased by 18% compared to the same period last year, according to official data released on Tuesday. The Insolvency Service, a government agency, reported 2,315 company insolvencies, a rise from 1,954 in the previous year and surpassing pre-COVID-19 levels. Individual insolvencies amounted to 9,881, marking a 6% decline from the previous year but still representing the highest figure since May.


Sterling has eased slightly from a two-month high this morning on lower-than-expected UK inflation, following its largest one-day rise against the dollar in a year on Tuesday. The pound has now gained an immense 2.3% since Friday’s post-Powell lows, after US CPI yesterday printed below expectations. UK CPI this morning has chipped away at these gains, however, coming in 0.1% lower than forecast at a two-year low of 4.6%, in a remarkably sharp drop from September’s 6.7% figure. The fall was supported by large downward effects in housing, food, and hotel costs. The easing in the core measure – excluding volatile components such as food and energy – was much less pronounced at 5.7% versus a 6.1% print last month, although this is still very welcome news for the Bank of England, for which markets are now close to fully pricing in a rate cut for June 2024. Sterling investors will now look to the retail sales report on Friday for clues on consumer spending and growth.


The euro’s mega surge has stalled in today’s session as it hovers below an almost four-month high against the dollar. Eurozone ZEW economic sentiment jumped yesterday morning with a 13.8 read versus 2.3 last month, suggesting that ‘peak pessimism’ has been reached in terms of the economic outlook – any score above 0.0 represents economic optimism, a level reached only in October after five months of pessimistic attitudes. In a concurrent release, the second estimate of Q3 GDP growth remained at -0.1%. Cooling US CPI inflation dominated the common currency’s movements yesterday, however, resulting in a nearly 2% jump on the day. On the economic calendar, traders will look to eurozone industrial production and trade balance this morning followed by two consecutive speeches from ECB President Lagarde on Thursday and Friday.


The dollar index plummeted yesterday in response to lower-than-expected inflation data that slashed at US yields and prompted markets to price out further rate hikes. In what was perhaps an extreme move, the dollar fell 1.5% against most currencies yesterday afternoon after only a 0.1% miss on the 3.4% forecast for year-on-year inflation. The closely watched core measure also printed slightly lower than the 4.1% expectation at 4.0% but remained twice the Federal Reserve’s target. US interest rates slid across the curve, with the 10-year yield dropping below 4.5% for the first time in eight weeks following peaks as high as 5% only three weeks ago. Markets have now fully pivoted their focus to rate cuts – derivatives pricing now indicates an almost 30% chance that these begin as soon as March. Dollar investors will look to PPI inflation and retail sales this afternoon for some reprieve, given that measures of consumer spending have generally beat expectations for the last few months.


Stocks experienced an uptick as investors responded positively to lower-than-anticipated inflation figures in both the US and the UK, suggesting that central banks may be concluding their aggressive interest rate hikes. The Stoxx 600 Index in Europe saw an increase, particularly in consumer product and mining stocks. However, Alstom SA faced a 14% decline after announcing job cuts and asset sales to bolster its balance sheet. US equity futures hinted at continued gains, following the S&P 500’s significant advance on Tuesday, the most substantial since April. The Asia Pacific Index by MSCI Inc. surged over 2%, with all markets showing positive momentum.

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

8:00 a.m.: UK Oct. CPI
10:30 a.m.: UK Sept. House Price Index
11:00 a.m.: Euro-area Sept. Industrial Production, Trade Data
11:00 a.m.: EU publishes autumn economic forecast
1:00 p.m.: US MBA Mortgage Applications
2:30 p.m.: US Oct. Retail Sales, PPI, Empire Manufacturing
5:00 p.m.: Russia 3Q GDP
5:30 p.m.: Israel Oct. CPI
7:00 p.m.: BOE’s Haskel speaks
Fed’s Barr testifies on oversight of financial regulators

Corporate Events

Earnings include Oracle, Cisco, Target, Experian, News Corp


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