September 16, 2022

“Below expectation retail sales figures have further pressured sterling to the downside in early trading. GBPUSD is currently trading at a 37-year low. The final Eurozone harmonised index of consumer prices reading for August and preliminary US Michigan consumer sentiment data for September are due later today.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US President Joe Biden has announced a tentative deal to avoid a crippling strike by railroad unions following all-night talks as the clock ran down on threats to disrupt US supply chains in the run-up to midterm. Biden, who was personally calling into the negotiations as late as 9:00 pm [local time] yesterday issued a pre-dawn statement announcing the preliminary resolution, which allows for a 24 percent wage increase between 2020 and 2024, including an immediate pay-out.

Prime Minister Liz Truss and Chancellor Kwasi Kwarteng are preparing to launch a last-ditch charm offensive to persuade Japan’s SoftBank to list British tech company Arm in the UK. The government will push for high-level talks with SoftBank executives after the official period of mourning for the Queen ends next week, according to officials with knowledge of the situation. The City of London has been rocked by takeover attempts for some of its largest tech groups in recent months — such as Aveva, Microfocus and GB Group — adding pressure on Truss’s administration to prevent the erosion of the UK’s listed tech sector.

GBP

Sterling is weaker than most major currencies in the early morning trade. Kwasi Kwarteng’s plan to scrap the bonus cap for UK bankers has been welcomed in the City of London, but it will plunge the Chancellor into a heated debate on how best to boost the country’s weak growth rate. The opposition Labour Party argues that removing the cap, which caps bonuses at twice annual salary and aims to discourage excessive risk-taking, will do little to boost growth and is merely a pay rise for wealthy bankers, as the country faces cost of living crisis. Meanwhile, UK retail sales fall at the sharpest pace in eight months as consumers cut back across the board in response to the soaring cost of living.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. The eurozone’s economic slowdown, or possibly recession, will not be enough to control inflation, and the European Central Bank will have to keep raising interest rates, ECB Vice President Luis de Guindos told a Portuguese newspaper. “The slowdown of the economy is not going to ‘take care’ of inflation on its own,” Expresso quoted de Guindos as saying today. Meanwhile, European new car registrations grew in August, bringing an end to 13 months of consecutive decline, data from the region’s carmaker association showed today.

USD

The dollar is well bid against most major currencies overnight. The US Department of Justice will reward businesses that recover pay from employees who break the law and will limit agreements that defer prosecution as part of a tougher regime against corporate misconduct. Lisa Monaco, deputy attorney-general, yesterday laid out policy reforms aimed at executing the sweeping changes she announced last year to crack down on corporate malfeasance.

Markets

US stock futures fell this morning as Wall Street headed towards a losing week. Dow Jones Industrial Average futures dropped by 181 points, or 0.58%. S&P 500 and Nasdaq 100 futures declined 0.75% and 0.93%, respectively. European markets fell sharply in early trading as recession warnings, expectations for further rate hikes and continued volatility in the energy market weighed on stocks. The pan-European Stoxx 600 was down 1.2% in the first hour, and UK, French and German indexes all fell. All sectors were in the red as energy, industrial and auto stocks dropped more than 2% each.

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

8:00 a.m.: UK Aug. retail sales
10:00 a.m.: ECB’s Rehn speaks
10:00 a.m.: Italy July trade balance
10:30 a.m.: ECB’s Lagarde and Villeroy speak
11:00 a.m.: Euro-area Aug. CPI
11:00 a.m.: Italy Aug. CPI
12:30 p.m.: Russia key rate
2:00 p.m.: Poland Aug. CPI

Corporate Events

NATO military chiefs meet in Tallinn, Estonia

 

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