Morning Report

October 03, 2023

“The dollar regained momentum yesterday, as a combination of resilient activity data and hawkish Fed speakers bolstered the US bond selloff and sent investor risk appetite into a nosedive. We will be keeping a close eye on the US labour market data that will be a key market mover this afternoon.”

Sam Cornford – Head of Trading


Main Headlines

A delegation of US senators, including Majority Leader Chuck Schumer, is planning to visit China next week with the hope of meeting Chinese President Xi Jinping. The visit aims to enhance engagement with China and address various business-related issues between China and the United States. In recent times, an increasing number of US businesses have expressed frustration with their operations in China, as noted by Commerce Secretary Gina Raimondo – this visit could provide an opportunity to discuss and address some of these concerns. “For US business in many cases patience is running thin and it’s time for action,” she said.

In September, prices at British retail chains increased at the slowest rate in a year, according to industry data. This adds to the indications that the high inflation rate in the UK is likely to continue its recent decline. The British Retail Consortium reported that annual shop price inflation eased to 6.2% last month, down from 6.9% in August, marking the lowest rate since September 2022. Furthermore, food price inflation declined for the fifth consecutive month, falling to 9.9% from 11.5%, and experienced a month-on-month decrease for the first time in over two years.


Sterling has steadied this morning after falling to fresh multi-month lows against the dollar in the early morning trade. Yesterday’s final manufacturing PMI was little changed and remained in deep contraction, and MPC member Catherine Mann’s hawkish speech, in which she argued that high inflation is likely to persist for longer than BoE forecasts, failed to lend support to the pound amid renewed dollar strength. GBP/EUR has exhibited notably low volatility this week as US data and risk sentiment drive the currency markets. The UK macroeconomic calendar is particularly quiet today, with a 30-year bond auction the only notable event – investors will look to final services and construction PMIs later on in the week.


The euro sank to its lowest level in 2023 this morning as it tracks its major peers’ losses. Static manufacturing PMI and unemployment rate prints, as well as a rise in German bund yields towards 12-year highs, were lost in the noise yesterday as runaway dollar strength dominated the FX headlines. This morning, rising Spanish unemployment further indicated the worsening state of the eurozone economy, but a silent afternoon for eurozone data will place US labour market data in focus for today as euro investors eye a string of output and PPI inflation data tomorrow.


Renewed dollar strength is the story of the week so far as a surge in US bond yields and resilient activity data set the tone for markets around the world yesterday. Momentum only seems to be accelerating for the greenback at the moment. Yesterday’s calendar began when the ISM manufacturing PMI signalled a decelerating decline in factory output, beating expectations and its previous month. Fed speakers then later doubled down on the hawkish rhetoric, reiterating the need to keep rates higher for longer and hinting towards the possibility of further hikes if inflation data does not improve as desired. Risk appetite plummeted this morning and nearly all major currencies conceded ground to the dollar as a result – in particular, USD/JPY inched to within a whisker of the 150 mark that many consider to be a line-in-the-sand for the Japanese government. US labour market data is the key focus for today with the JOLTS Job Openings survey, which triggered significant volatility last month.


Stocks experienced a decline, along with US Treasuries, following hawkish signals from the Federal Reserve.. In Europe, UK fast-fashion retailer Boohoo Group Plc witnessed one of the most significant drops, plummeting by 10% after lowering its forecasts as it reduces prices to attract shoppers facing financial difficulties. The Stoxx 600 index in the region retreated by 0.2%, marking a fresh six-month low, while US equity futures remained relatively stable.

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

8:00 a.m.: ECB’s Simkus speaks
8:10 a.m.: ECB’s Lane speaks
9:00 a.m.: Turkey Sept. CPI
10:15 a.m.: Riksbank’s Bunge speaks
10:35 a.m.: ECB’s Lane, Riksbank’s Bunge in panel discussion
11:45 a.m.: Nobel Prize in Physics
12:00 p.m.: Portugal Aug. Industrial Production
2:45 p.m.: ECB’s Villeroy speaks


To learn more about Ballinger & Co., please visit our website or our LinkedIn page.