November 24, 2022

“Minutes from the November Fed meeting indicated several officials support the need to moderate the pace of rate hikes, adding weight to expectations that the central bank will raise rates by 50bps next month. The US dollar weakened significantly this morning as investors, promoted by the prospect of a slower pace of interest rates hikes, placed bets on riskier assets.”

Sam Cornford, Partner – Head of Trading

Main Headlines

A “substantial majority” of Federal Reserve officials support slowing down the pace of interest rate rises soon, even as some warned that monetary policy would need to be tightened more than expected next year. Minutes from the November meeting suggested that officials are committed to ploughing ahead with their campaign to stamp out elevated inflation. However, the account also signalled that officials are prepared to start raising rates in smaller increments while they assess the economic effect of the most aggressive tightening campaign in decades.

The gilt market rout that forced UK pension funds to rapidly sell assets in September contributed to driving down the value of retirement schemes by as much as £500bn, MPs were told on Wednesday. Giving evidence to the Commons’ work and pensions select committee, Iain Clacher, a professor at Leeds University Business School, said “roughly £500bn is probably missing somewhere.” Thousands of corporate pension plans had to raise cash to meet urgent calls on so-called liability-driven investing strategies as gilt yields shot up following the government’s bungled “mini” Budget.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. The EU will demand that derivatives traders use accounts at clearing houses in the bloc for some of their transactions, as part of plans to take a share of the €115tn market processed through the City of London. Halfords is aiming to recruit 1,000 car technicians by targeting retirees and women as UK businesses compete for skilled workers amid chronic labour shortages. Rolls-Royce has urged the UK government to enter formal negotiations over the funding for small nuclear reactors, which it hopes to build in England or Wales by the early part of next decade.

EUR

Euro is well bid against most major currencies overnight. Europe’s energy crisis is set to persist for years if the region fails to reduce demand and secure new gas supplies. Mild autumn weather and a dash to fill up storage sites across Europe has bolstered the region’s energy security this winter, but concerns are starting to mount over whether sufficient supplies will be available next summer and for the winter that follows. European Council president Charles Michel will travel to Beijing for a meeting with Xi Jinping next month, in a move likely to highlight European divisions on how to engage with China.

USD

The dollar is weaker than most major currencies in the early morning trade. The Biden administration will continue to support congress people making official visits overseas, including Taiwan, White House National Security Council spokesman John Kirby said. Turkish air attacks in northern Syria threaten the safety of United States military personnel and the escalating situation is jeopardising years of progress against ISIL (ISIS) fighters, the Pentagon has said. Biden administration officials have assessed that Russian President Vladimir Putin may use chemical weapons in Ukraine first before resorting to a nuclear confrontation with NATO if his troops continue to lose ground.

Markets

A gauge of global stocks headed for a third straight gain this morning and the dollar fell after Federal Reserve meeting minutes showed support for tapering interest-rate increases. European stocks were steady, with trading volumes expected to be lower with the US market closed for the Thanksgiving holiday. US futures edged higher after the S&P 500 closed at a two-month high Wednesday. Asia’s equities benchmark climbed. Oil fell as the European Union considered a higher-than-expected price cap on Russian crude and signs of a global slowdown increased.

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

8:45 a.m.: France Nov. Business Confidence
10:00 a.m.: Germany Nov. IFO Survey
10:45 a.m.: BOE’s Ramsden speaks
11:30 a.m.: BOE’s Pill speaks
12:00 p.m.: UK Nov. CBI Trends
1:30 p.m.: ECB Minutes
2:00 p.m.: ECB’s Schnabel speaks
2:45 p.m.: BOE’s Mann speaks
5:00 p.m.: ECB’s Nagel speaks
US markets closed for Thanksgiving

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