Morning Report

October 13, 2023

“Hot US inflation data has restored the dollar’s upwards momentum after almost a week of decline, triggering significant volatility that saw 1% moves for sterling and the euro yesterday afternoon. Markets await a raft of central bank speakers today.”

Sam Cornford – Head of Trading


Main Headlines

The race to elect the next speaker of the US House of Representatives took an unexpected turn as Representative Steve Scalise, who had secured the Republican nomination for the position, dropped out of the race on Thursday. Scalise was unable to secure the 217 votes needed to be elected as speaker on the House floor, as some of his fellow Republicans refused to support his candidacy. This development further highlights the divisions within the Republican Party and prolongs the leadership vacuum in the House of Representatives.

The Committee on Climate Change, an independent advisory panel, has expressed concerns that recent changes to Britain’s climate policies, including the delay in the ban on new petrol cars, alterations to plans for phasing out gas boilers, and a decision not to regulate improved energy efficiency in rented homes, could make it more challenging for the country to meet its net-zero emissions target by 2050. The CCC emphasised that these policy changes may lead to increased energy and transportation costs for households.


A sterling plunge has subsided this morning following a sudden loss to the dollar yesterday afternoon. The GDP print saw the pound nudge higher in the morning before an upside US inflation surprise saw sterling plummet over 1% throughout the afternoon. No market-jolting data releases are in the UK macro calendar for today, but a speech by Bank of England Governor Bailey this morning will be scrutinised by investors to tease out clues regarding a possible further hike in Q4. The CB leading index is also due this afternoon, which is a composite index on economic direction.


The euro erased this week’s gains versus the dollar yesterday as it tracked the pound’s losses. The ECB’s monetary policy meeting minutes from September further cemented the view that the central bank has peaked in its tightening cycle. The split decision to hike was seemingly driven by a concern that a pause would be interpreted as a weakening resolve to bring down inflation, despite the overall view that 3.75% was probably restrictive enough, given evidence of slowing inflationary momentum. There was also an explicit mention that, whilst bring inflation down is the main target, a lower interest rate path that avoided a recession would be preferable. French final CPI printed as expected this morning, and the euro area industrial production figure is expected to show a stagnating output, followed by a speech by ECB President Lagarde this afternoon.


The previously battered dollar has regained its bullish momentum towards the end of this week, reversing four days of decline in an afternoon after CPI inflation came in hot. The headline year-on-year figure was a stagnant, higher-than-expected 3.7%, and the month-on-month print also beat forecasts at 0.4%, primarily driven by increases in shelter costs. The markets immediately took the print as supportive for the ‘higher-for-longer’ mantra, sending Treasury yields and the dollar surging again. The prospects of a hike in December were initially raised from 28% to 40%, but as of this morning they sit at around 30%, suggesting that the dovish pivot from Fed officials this week has cemented itself into the market psyche. To come today, the Fed’s Harker is expected to speak about the 2023 economic outlook and the preliminary UoM consumer sentiment figure is due to show a moderating outlook.


Global equities faced further declines, and crude oil prices rose amid escalating tensions in the Middle East as Israel appeared to be preparing for a ground invasion of Gaza. Ongoing economic challenges in China, coupled with expectations of sustained high-interest rates in the US, contributed to the negative sentiment in the markets. While the Stoxx Europe 600 index started with a dip, gains in energy stocks mitigated the overall decline as Brent crude oil surged by more than 1%. Notable stock movements included Ubisoft Entertainment rising after the UK approved Microsoft’s acquisition of Activision Blizzard, and Sartorius AG falling after the company lowered its guidance for the year.

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

8:00 a.m.: Sweden Sept. CPI
8:45 a.m.: France Sept. CPI
8:45 a.m.: ECB’s Nagel speaks
9:00 a.m.: Spain Sept. CPI
10:00 a.m.: BOE’s Bailey speaks
10:00 a.m.: Poland Sept. CPI
11:00 a.m.: Euro-area Aug. Industrial Production
12:00 p.m.: UK sells bills
2:30 p.m.: US Sept. Import Prices
3:00 p.m.: ECB’s Lagarde speaks
3:00 p.m.: Fed’s Harker speaks
4:00 p.m.: US Oct. UMich Sentiment
6:30 p.m.: BOE’s Cunliffe speaks

Corporate Events

Earnings include Citi, JPMorgan, Wells Fargo, BlackRock


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