Morning Report

November 20, 2023

“Softening US data sparked the dollar’s worst weekly performance since July last week and the euro has ridden the wave largely unchallenged, gaining over 3% since the beginning of October. The current momentum will be tested later this week however, when the purchasing manager surveys give clues on economic growth.”

Sam Cornford – Head of Trading


Main Headlines

Japanese shares have surged to their highest level since 1990, driven by record-high corporate profits, excluding financials, which reached 32 trillion yen in the second quarter, fuelling foreign demand. The Nikkei has risen over 8% this month and nearly 29% for the year. The broader Topix index has gained 26% this year but still maintains a low price-to-earnings ratio of 14, in contrast to 23 for the S&P 500 and almost 29 for the Nasdaq.

British Chancellor Jeremy Hunt is set to deliver an Autumn Statement on Wednesday, aiming to stimulate the sluggish British economy and bolster the Conservative Party’s prospects ahead of an anticipated election next year. Amid speculation about potential cuts to income tax or national insurance, Hunt stated on Sunday that he would avoid tax cuts that might contribute to inflation. Pressure has mounted on Hunt from some Conservative lawmakers, concerned about the significant lead the opposition Labour Party holds in opinion polls, demanding tax cuts to address the situation. “We do want to bring down the tax burden but we will only do so responsibly,” Hunt told Sky News. “The one thing we won’t do is any kind of tax cut that fuels inflation.”


Sterling is trading higher against most major currencies this morning, having gained 1% against a weakening dollar since Friday’s dip on disappointing retail sales. A string of softening UK inflation and consumer spending data has struggled to dent the upwards momentum in GBP/USD this month, but it has translated into a modest decline against the euro. Investors will start a busy week by dissecting a speech by BoE Governor Bailey this evening for clues towards the central bank’s policy path. After today, Chancellor Hunt’s budget statement on Wednesday and the flash PMIs on Thursday are the key events for the pound this week.


The euro continues to breach key levels as it extends its November climb. A lack of eurozone data has allowed the currency to ride the wave of dollar weakness unimpeded for the past couple of weeks, but this week’s PMIs are set to be a major test to its current level. Germany’s October Producer Price Index this morning printed slightly lower than expected at -0.1% month-on-month in a further signal of waning inflation in the euro area. The Deutsche Bundesbank’s monthly report is also due this morning, which contains detailed analysis of the bank’s view on current economic conditions and the outlook for growth and inflation. Later this week, the PMIs on Thursday will put the spotlight on growth in a data release that has been generally damaging to the euro in recent months, given repeated disappointments.


The dollar notched its worst week since July last week, sliding 2% to a two-month low on a cool CPI inflation report as markets ruled out further rate hikes and turned their attention to more aggressive rate cuts. The initial CPI-induced slide was triggered by a parallel plunge in US Treasury yields and yet, despite stable and even climbing yields in the past few days, further dollar-weakening capital flows have ensued, with an unclear trigger that goes beyond the reassessment of the Fed’s monetary easing cycle. A quiet macro diary today turns attention to tomorrow’s meeting minutes for the FOMC’s early November rate decision, in which a dovish pivot arguably became the initial catalyst for the dollar’s current bearish momentum.


U.S. equity futures are stable after a three-week stock rally, driven by speculation that the Federal Reserve is approaching the conclusion of its rate-hike cycle. Contracts on the S&P 500 and the European Stoxx 600 have shown little change, while those on the Nasdaq 100 experienced a slight dip of 0.1%. Gold prices have remained steady, and Brent crude oil has rebounded from a four-month low reached on Friday.

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

8:00 a.m.: Germany Oct. PPI
10:10 a.m.: ECB’s Vujcic speaks
11:00 a.m.: Euro-area Sept. Construction Output
2:00 p.m.: ECB’s de Cos speaks
2:50 p.m.: France sells bills
4:00 p.m.: US Oct. Leading Index
7:00 p.m.: US to auction 20-year bonds
7:45 p.m.: BOE’s Bailey speaks
8:00 p.m.: ECB’s Villeroy speaks

Corporate Events

Earnings include Xiaomi, Zoom


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