November 23, 2022

“The greenback held firm in the early morning trade, as investors anxiously await the release of minutes from the Federal Reserve’s latest policy meeting, hoping that it will offer clues on the outlook for inflation and the pace of interest rates hikes.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The US Supreme Court has cleared the way for Donald Trump’s tax returns to be handed over to Democrats in Congress. Mr Trump has been battling for years to keep his tax returns private, accusing Democrats of a politically motivated fishing expedition. The new ruling was a major setback for the former president, coming days after he announced a third run for the White House in 2024. In his previous campaigns Mr Trump defied convention for presidential candidates by declining to make his tax returns public. The Democrat-controlled committee will now get six years of tax returns from Mr Trump and his related business entities, for the period of 2015 to 2020.

Mortgage rates on five-year fixed deals have dipped below 6 per cent for the first time in nearly two months, in a sign the UK’s home loan market is stabilising following the government’s ill-fated “mini” Budget. The average rate on a five-year fixed-rate mortgage fell to 5.95 per cent on Tuesday, the lowest level since early October, according to data provider Moneyfacts. The latest drop is a reprieve for borrowers after rates last month shot up to their highest level since the financial crisis. The government’s fiscal statement on September 23 sent gilt yields soaring, forcing many lenders to withdraw fixed-rate deals for new customers and reinstate them with higher rates.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. Openreach is to limit its investment in the rollout of ultrafast fibre broadband as BT’s networking division seeks to curb costs and get “bang for its buck” with UK inflation running at its highest level in four decades. The Bank of England will press on with interest rate rises to battle inflation even though Britain is heading into a long albeit shallow recession. Jeremy Hunt announced more pain in an autumn financial statement last week, with tax rises now and spending cuts further ahead, so any relief on borrowing costs would have been welcomed by indebted households.

EUR

Euro is well bid against most major currencies overnight. European gas prices climbed on Wednesday, after Russia warned it could restrict supplies to western Europe as early as next week, unsettling energy markets ahead of the winter. TTF, the regional gas benchmark, rose as much as 6 per cent to €132 a megawatt hour in early London trading. Metalworking union IG Metall said it had struck a wage deal with Volkswagen for the carmaker’s western German factories after 11 hours of negotiations overnight, giving around 125,000 workers 8.5% more pay.

USD

The dollar is weaker than most major currencies in the early morning trade. Renewables are on track to generate more power than coal in the United States this year. Supply chain constraints and trade disputes have slowed wind and solar installations, raising questions about the United States’ ability to meet the emission reductions sought by the Inflation Reduction Act. The Biden administration is banking on the landmark climate law cutting emissions by 40 percent below 2005 levels by 2030. Germany and France pushed for tougher industrial policies to counter the threat from US reforms that risk triggering a transatlantic trade war.

Markets

European stocks and US equity futures were steady as investors awaited the release of policy minutes from the Federal Reserve’s latest meeting for insights on the path of rate hikes. The Stoxx Europe 600 held near a three-month high, as basic resources and energy stocks gained. Credit Suisse Group AG dropped after warning of a fourth-quarter loss. Contracts on the S&P 500 edged higher after the underlying gauge closed at its highest level since Mid-September on Tuesday. Nasdaq 100 futures were little changed. An index of Asian shares rose.

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

9:30 a.m.: ECB’s Guindos speaks
10:00 a.m.: Euro-Area Nov. PMIs
10:00 a.m.: ECB’s de Cos speaks (and at 10:30 a.m.)
10:30 a.m.: UK Nov. PMIs
11:30 a.m.: Germany to sell €1 billion 2053 bunds
12:30 p.m.: UK to sell £3.5 billion 2025 gilts
1:00 p.m.: ECB’s Centeno speaks
2:30 p.m.: US Initial Jobless Claims
4:00 p.m.: UK’s Hunt testifies to lawmakers
4:30 p.m.: BOE’s Pill speaks
8:00 p.m.: Fed Minutes

Corporate Events

Earnings include Johnson Matthey, De la Rue

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