Morning Report

September 14, 2023

“US CPI inflation failed to generate significant price movement yesterday, resulting in an overall muted reaction in market expectations for Federal Reserve rate tightening. The ECB’s rate decision today will be the key source of FX volatility as trader bets lean towards a cycle-ending hike.”

Tim Hallinan – Trading Director


Main Headlines

Tesla CEO Elon Musk, along with Meta Platforms CEO Mark Zuckerberg, Alphabet CEO Sundar Pichai, and other tech leaders, urged the need for a US AI regulator during a meeting with lawmakers on Capitol Hill. Lawmakers aim to address the risks associated with the rapidly growing AI technology, which has gained significant investment and consumer attention since the launch of OpenAI’s ChatGPT chatbot. Zuckerberg emphasised Congress’s role in fostering AI innovation while ensuring necessary safeguards, recognizing the government’s responsibility in managing this emerging technology.

The UK government has announced a £200 million ($250 million) injection of additional funding into the National Health Service (NHS) to enhance its resilience during the upcoming busy winter season. Prime Minister Rishi Sunak has put reducing patient waiting lists within the NHS as one of his top five goals ahead of an anticipated national election next year. In other news, a property industry survey revealed that British house prices experienced their most significant decline in 14 years during August. This decline is attributed to weakened demand, driven by increased mortgage costs and economic uncertainty. The Royal Institution of Chartered Surveyors (RICS) reported the weakest house price balance since April 2020 when the property sector was heavily affected by the COVID-19 pandemic.


Sterling is trading slightly weaker than most major currencies this morning. Yesterday’s decline, in response to weakened economic output data, was followed by a swift retracement of the losses upon further consideration of mitigating factors – July’s GDP contraction was significantly affected by wet weather and health sector strikes, according to the ONS. Beyond the news that house prices had fallen the most in 14 years, the macro diary for the UK is relatively bare for the rest of the week. Expect Sterling price action to be driven by focal events coming out of the US and Eurozone, as markets will be eyeing UK CPI inflation data due next Wednesday before the BoE rate decision on Thursday.


The Euro has lifted from a three-month low to the Dollar as market attention turns to focus on the ECB’s rate-setting meeting this afternoon. Bets continue to lean towards an approximately 65% chance of a hike following a hawkish repricing earlier in the week. Risks for the Euro in response to the decision are firmly on the downside here – with 23bps of tightening priced in before the year-end, a hike would most likely be the last of the cycle and, unless the ECB can convince markets that the door really is open for tightening beyond the 4% mark, a Euro rally is not likely to be sustainable. Policymakers will weigh up the opposing forces of persistent inflationary pressures – compounded by spiking energy prices – and a slip towards a Eurozone recession, which will make it increasingly hard to justify a hawkish stance as economic indicators worsen.


The Dollar remains steady today after key CPI data yesterday failed to generate significant market movement after post-event volatility had settled. The headline figure ticked upwards from 3.2% previously to 3.6%, marginally higher than expected, but the numbers were skewed by a month-on-month surge in energy commodity prices of 10.5%. Rising energy prices, if sustained, will bleed into other price-setting mechanisms over time, but the print overall did little to alter the outlook for the Federal Reserve’s monetary tightening cycle. The core measure, meanwhile, came out slightly higher than expected, but illustrated a continued downtrend to 4.3% from 4.7% last month. A hold is almost fully priced in now for next week’s meeting. A packed macroeconomic calendar awaits today for the US, with PPI inflation, retail sales, and unemployment claims due to add to the Fed’s economic data to consider.


The S&P 500 saw modest gains, with interest-rate-sensitive mega-cap stocks like and Microsoft Corp driving the tech-heavy Nasdaq higher. In Asian markets and European equity futures, optimism prevailed as investors hoped for a pause in rate hikes by the Federal Reserve and ahead of the European Central Bank’s rate decision. Euro Stoxx 50 futures recorded a 0.3% increase, and a regional benchmark rebounded from a two-day decline. Japanese shares, which surged over 1%, received an additional boost when Economic Revitalization Minister Yoshitaka Shindo emphasised the necessity for robust economic measures.

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

8:00 a.m.: Sweden Aug. CPI
8:00 a.m.: Saudi Arabia CPI
8:30 a.m.: Switzerland Aug. Producer & Import Prices
1:00 p.m.: Ukraine Monetary Policy
2:15 p.m.: ECB Monetary Policy
2:30 p.m.: US Aug. PPI, Retail Sales, Initial Jobless Claims
2:45 p.m.: ECB’s Lagarde speaks

Corporate Events

UBS CEO Sergio Ermotti addresses Economic Club of New York
Earnings include Visional, Adobe, Lennar, THG
Trading debuts include Arm, Thai Coconut


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