Morning Report

November 17, 2023

“Weak retail spending is a significant drag on sterling this morning as the soft data continues to paint a bleak economic picture for European economies. This small dent has not prevented sterling and the euro from notching one of their best weeks against the dollar in months, however, driven by the stellar surges in response to cooling US inflation and revised rate expectations for the Fed.”

Tim Hallinan – Trading Director


Main Headlines

US President Joe Biden signed a stopgap spending bill on Thursday to prevent a government shutdown after the Senate had passed the bill a day earlier. Biden signed the document during a dinner at the Legion of Honor museum in San Francisco, coinciding with the Asia Pacific Economic Cooperation (APEC) summit. The Senate’s 87-11 vote concluded the third fiscal standoff in Congress this year, avoiding the risk of defaulting on over $31 trillion in debt and preventing a partial government shutdown that could have affected approximately 4 million federal workers.

British retail sales volumes fell unexpectedly in October as stretched consumers stayed at home, official data showed on Friday in a new warning sign for the economy. Retail sales volumes dropped 0.3% month-on-month, following a revised 1.1% decline in September that was worse than first estimated, the Office for National Statistics said. Overall, the figures fitted with the darkening outlook for Britain’s economy, with economic growth stagnant and strong price pressures now fading, albeit slowly.


Sterling is set for a weekly rise of almost 1.5% despite weak consumer spending data trimming some gains this morning. Further confirmation of a weak economic outlook and easing inflationary pressures dragged the pound down around 0.3% immediately after the retail sales release. Today’s calendar is relatively quiet, although we can expect a couple of Bank of England speeches this afternoon from Ramsden and Greene, who are likely to reiterate the necessity of a restrictive stance in the medium-term.


The euro is in a brief period of consolidation as we head towards the weekend, although it has mirrored some of sterling’s weakness this morning amid a bleak European outlook. The common currency received a short-lived lift from US jobless claims yesterday afternoon but ultimately ended the day flat, taking a breather from the volatile swings from the previous couple of sessions. The final revisions of eurozone CPI and current account data are due this morning, preceded by a speech by ECB President Lagarde at the Frankfurt European Banking Congress early this morning. Investors will also watch the Fitch and Moody’s reviews of Italy’s sovereign credit rating over the next few days – with Moody’s currently assessing the Italian government at one notch above junk status with a negative outlook, a downgrade, although not expected, would likely trigger large turmoil in the European bond markets and batter the euro.


The US dollar was dented yesterday afternoon by the highest number of weekly unemployment claims in three-months, dragging the 2-year Treasury yield back down to its previous CPI-induced lows from Tuesday. Industrial production also fell further than expected at -0.6% compared to a -0.4% economist forecast, driven primarily by autoworker strikes that weighed on manufacturing output. A sustained fall in the greenback was not achieved, however, as falls in US yields were counterbalanced to some extent by concerns about global growth and China’s sluggish recovery, worsened by sliding house prices in October. Nevertheless, the dollar is still set for its largest weekly decline in months against the euro and the yen on cooling CPI inflation, with the 100bps of rate cuts priced into next year generating strong bearish momentum. On today’s economic calendar, we have building permits and housing starts to give investors an insight into the health of the property market, followed by a speech by FOMC member Goolsbee.


European equity futures saw gains despite a decline in Asian stocks on Friday. The ongoing technological dominance struggle between the US and China led Alibaba Group Holding Ltd. to cancel the listing of its $11 billion cloud unit, dampening sentiment in Asian markets. Oil was on track for a fourth consecutive weekly loss, having entered a bear market due to concerns about a supply glut.

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

9:00 a.m.: ECB’s Villeroy speaks
9:30 a.m.: ECB’s Lagarde speaks
10:00 a.m.: ECB Sept. Current Account
10:00 a.m.: ECB’s Holzmann speaks
10:15 a.m.: ECB’s Vujcic speaks
11:00 a.m.: Euro-area Oct. CPI
12:00 p.m.: UK sells bills
2:00 p.m.: ECB’s Nagel speaks
2:10 p.m.: BOE’s Ramsden speaks
2:15 p.m.: ECB’s Wunsch and BOE’s Greene speak
2:30 p.m.: US Oct. Housing Starts
2:45 p.m.: Fed’s Collins speaks
2:45 p.m.: Fed’s Barr speaks
3:30 p.m.: Fed’s Daly speaks
3:45 p.m.: Fed’s Goolsbee speaks
4:00 p.m.: ECB’s Cipollone speaks
Frankfurt European Banking Congress: Speakers include Deutsche Bank’s Christian Sewing and BNP’s Jean Lemierre
Fitch reviews Italy’s sovereign rating

Corporate Events

Earnings include Fox Corp, Estée Lauder


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