Morning Report

September 11, 2023

“As central banks prepare to make their September interest rate decisions, markets will be eyeing the final key data points this week to make their final bets on the peak of the current historic tightening cycles. The ECB decision on Thursday is first up, with economists split on a hike or a pause.”

Sam Cornford, Partner – Head of Trading


Main Headlines

On Sunday, US President Joe Biden secured agreements with Vietnam regarding semiconductors and minerals, elevating Hanoi’s diplomatic status to the highest level, alongside China and Russia. This move has been pursued by the US for months, recognising Vietnam’s significance in diversifying global supply chains away from China-related risks. Vietnam is closely managing its relationship between the US and China, aiming to establish itself as a low-cost manufacturing hub amidst international competition. Furthermore, Vietnamese officials are anticipating visits from top Chinese officials, potentially including President Xi Jinping, in the near future, as they strive to maintain positive relations with major world powers.

At the G20 Summit in New Delhi, Prime Minister Rishi Sunak announced that Britain will allocate $2 billion to the Green Climate Fund (GCF) to aid developing nations in addressing climate change. This commitment marks the largest single funding contribution from the UK to combat climate change to date, as stated by the government. Additionally, during a meeting with Chinese Premier Li Qiang at the G20 summit in India, Sunak expressed concerns about potential Chinese interference in Britain’s parliamentary democracy, particularly in light of the reported arrest of two alleged spies.


Sterling rebounded against most major currencies overnight after dovish rhetoric from the Bank of England led to lower repricing last week. Monetary tightening expectations were scaled back as officials indicated that the central bank is nearing its terminal rate and that inflation is expected to fall considerably before the end of the year. Chief Economist Huw Pill will have his turn to comment today as he speaks this morning, setting the scene for the labour market data due tomorrow, which includes the unemployed claimant count change and the average earnings index.


The Euro is stronger against the Dollar and weaker against Sterling this morning. The ECB rate decision on Thursday is the key event for this week, with bets on a hike ramping up slightly as a result of some hawkish comments amid increasing inflationary pressures from crude oil and gas price spikes. The combination of sticky, lingering inflation and evidence of an economic slowdown has spurred division in the Governing Council – with the decision now almost a coin toss, significant Euro volatility can be expected later in the week. Until then, Italian industrial production fell a more-than-expected 0.7% this morning, with German economic sentiment tomorrow and fresh EU economic forecasts on the market’s macro radar this week.


The Dollar halted a four-day rally as speculative positions are pared back ahead of Wednesday’s CPI reading, which will be key for the Fed’s rate decision next week. The US currency tumbled versus risky Asia-Pacific currencies owing to central bank moves in the region. The onshore Yuan was boosted by the central bank’s most biased daily midpoint guidance on record, signalling increasing discomfort with the Yuan’s slide. Meanwhile, the Yen jumped versus the Dollar as BoJ Governor Kazuo Ueda fuelled hopes that negatives rates in Japan could finally reach an end. The US macroeconomic data is thin today and tomorrow, before ramping up later on this week with key inflation data followed by retail sales, unemployment claims, industrial production, and consumer sentiment indexes.


European stocks and US futures surged on optimism that China’s economy is stabilising and on confidence in the US ability to control inflation without hindering growth. The Stoxx 600 opened with a 0.5% increase, and US futures indicated a positive start for Wall Street. Despite Chinese investors selling off property developer shares and skepticism regarding government efforts to rejuvenate the real estate market, Asian stock markets gradually turned positive on Monday. MSCI’s broadest index of Asia-Pacific shares outside Japan, which had earlier experienced declines, rebounded and was up by 0.3%.

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

8:00 a.m.: Norway, Denmark Aug. CPI
9:00 a.m.: Czech Republic Aug. CPI
9:00 a.m.: Turkey July Industrial Production, Current Account
10:00 a.m.: Italy July Industrial Production
10:00 a.m.: BOE’s Pill speaks
11:00 a.m.: European Commission publishes Summer Economic Forecast
11:30 a.m.: Germany calls for bids on bills
1:00 p.m.: South Africa July Manufacturing Production
2:50 p.m.: France sells bills
5:00 p.m.: NY Fed 1-Yr Inflation Expectations

Corporate Events

Earnings include Oracle, Vistry


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