Morning Report

November 21, 2023

“The US dollar is once again in focus today as it extends its plunge beyond a two-month low. The meeting minutes from the Federal Reserve’s most recent decision to hold rates takes centre stage for markets this afternoon, where investors will be keen to scrutinise the potential future actions of key central bankers.”

Tim Hallinan – Trading Director


Main Headlines

The United States is set to unveil the first international strategy for the commercialisation of nuclear fusion power at the upcoming UN climate summit in Dubai. This announcement is anticipated during US Special Envoy on Climate Change John Kerry’s visit to the fusion company Commonwealth Fusion Systems near Boston on Monday. As part of the plan, Kerry will emphasise enhanced collaboration with other nations to accelerate progress in the clean source of energy. The UK and the United States previously signed a cooperation agreement on fusion on November 8.

The British Business Bank (BBB) is planning to establish a new fund to encourage pension schemes and asset managers to invest in growth companies, as part of broader reforms aimed at unlocking savers’ funds to stimulate the economy, according to the UK finance ministry on Tuesday. The initiative seeks to shift pension schemes away from a heavy emphasis on bonds and global blue-chip stocks, encouraging investment in UK growth companies to enhance returns for investors. Additionally, this move aims to strengthen the pipeline for potential company listings, addressing increased competition faced by the London Stock Exchange from New York and European Union financial centres following Brexit.


Sterling continues to plumb beyond a two-month high on a wave of dollar weakness this morning. Bank of England governor Andrew Bailey gave more familiar language last night when he said that it is far too early to discuss rate cuts, and that he cannot declare victory on last week’s sharp fall in CPI inflation. Public sector borrowing in October stood at a lower-than-expected £14.9bn, which is a £4.4bn increase on the figure from October 2022, and the second highest October borrowing since monthly records began in 1993. However, borrowing in the April to October period ran around £17bn lower overall than forecast by the OBR, potentially leaving Chancellor Jeremy Hunt room for pre-election tax cuts in tomorrow’s budget statement. The focus for sterling investors this morning ais the Monetary Policy Report Hearings, where several central bankers will testify for several hours on inflation and monetary policy to Parliament’s Treasury Committee. Volatility can normally be expected throughout the hearings as markets parse each word for its implications for the future direction of the policy interest rate.


The euro retains its November bullish momentum in the early stages of this week. The data calendar is particularly sparse today and tomorrow, with a speech from Lagarde this afternoon today’s sole potential market mover. Focus remains on Thursday’s PMIs, which have been a significant source of euro weakness since the summer and, for now, euro investors appear content to continue to bid up the common currency on the softer US outlook.


The dollar has extended its losses overnight, dragged down against most currencies on a rallying Chinese yuan. The People’s Bank of China set the midpoint of its USD/CNH daily fixed trading band at its lowest since early August, sending the yuan to a four-month high amid a potential round of fiscal stimulus for the property sector. Some key data is due this afternoon, beginning with existing home sales, which is expected to print at its lowest level since 2010 due to sky-high mortgage rates and the tightening of financial conditions driven by Fed policy. The FOMC meeting minutes this evening are then set to give a deeper insight into the thought process behind the decision to hold rates earlier this month, which ultimately catalysed the current bout of bearish momentum with a dovish pivot and an acknowledgement of the impact of elevated rates on economic activity. Markets are likely to latch on to any dovish signals that affirm the recent dollar sell-off, although we may well be reaching a peak in dollar weakness without positive news in other FX, given that any further fall in US bond yields could potentially entice the Fed to hike further.


On Tuesday, Asian stocks and emerging market currencies made gains, and European stock futures indicated another day of increases. A weakened dollar and an overnight rally on Wall Street contributed to increased demand for risk assets. Technology stocks were among the top performers in the Asian region. A gauge of China developers surged as much as 7.6%, heading for its best day since early in the month. This gain followed a report by Bloomberg stating that regulators are drafting a list of 50 developers eligible for various financing options. US contracts showed little change after the S&P 500 recorded its strongest close since August, and the Nasdaq 100 reached a 22-month high.

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

8:00 a.m.: UK Oct. Public Sector Net Borrowing
8:00 a.m.: EU Oct. New Car Registrations
11:15 a.m.: BOE’s Bailey testifies to UK Parliament
2:00 p.m.: Hungary Central Bank Rate Decision
4:00 p.m.: US Oct. Existing Home Sales
5:00 p.m.: ECB’s Lagarde speaks
6:00 p.m.: ECB’s Schnabel speaks
6:35 p.m.: ECB’s Centeno speaks
8:00 p.m.: FOMC publishes meeting minutes

Corporate Events

Earnings include Nvidia, Lowe’s, Autodesk, HP


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