Morning Report

August 03, 2023

“The Bank of England is expected to raise rates by 25bp today from the current 5% level. Another unexpected 50bp hike, similar to that in June, would likely lead to significant volatility. EU Final Services PMI came in at 50.9, signalling industry expansion, while German Trade Balance exhibits notable improvement, surpassing forecasts by 3.7Bn.”

Tim Hallinan – Trading Director

Main Headlines

Speaking at an Internal Revenue Service contractor office near Washington, Treasury Secretary Janet Yellen expressed strong disapproval over Fitch Ratings’ downgrade of the primary U.S. credit rating. She deemed the downgrade “completely unjustified,” highlighting its oversight of enhanced governance metrics under the Biden administration and the nation’s economic vitality. In other news, surpassing predictions, U.S. private payrolls surged in July, propelled by increased hiring in small businesses, underscoring the labour market’s ongoing strength and potential protection against a recession. Wednesday’s ADP National Employment report also indicated a slowdown in wage growth, promising a positive impact on inflation projections, which also adds to a series of encouraging recent data.

Today, the Bank of England is expected to raise rates to a 15-year peak of 5.25% from the current 5%, with a risk of repeating June’s surprise 50bp hike due to high inflation. Market forecasts initially saw a peak of 6.5% on July 11, driven by wage growth, but then retreated to 5.75% due to decreased consumer price inflation. Notably, June’s annual price growth was 7.9%, almost four times the BoE’s 2% target and over twice the U.S. rate. In other news, the UK government is evaluating feedback on its post-Brexit border plan due to media reports suggesting a possible delay in implementing import checks for EU goods. Despite UK goods facing EU inspections, checks on EU agricultural items have been repeatedly pushed back. Inflation concerns are leading ministers to contemplate extending border controls further, apprehensive that heightened import bureaucracy could worsen the inflation situation.


Sterling is weaker against the Dollar and Euro this morning. Later today we receive several important reports from the Bank of England. The first is the Monetary policy report, which provides the BOE’s projection for inflation and economic growth over the next 2 years. Next, the Monetary Policy Committee Bank Rates Votes, which is currently forecast at 7-0-2 in favour of the increase. The third is the Monetary Policy Summary, which contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. And lastly is the Official Bank Rate report, however the rate decision is usually priced into the market, so it tends to be overshadowed by the Monetary Policy Summary.


The Euro is weaker than the Dollar and stronger than the Sterling in the early morning trade. Earlier, the Final Services PMI was released for the whole of the Eurozone. The reported figure was 50.9, which was 2bps below the forecast, however this figure still indicates some level of industry expansion. There also was the German Trade Balance reporting, which measured the value between imported and exported goods. The actual figure was 3.7Bn above the forecast of 15Bn, which shows significant improvement from previous months. Lastly there was the French Gov Budget Balance, which showed a slower rate of decline from previous months, with only a 9Bn decrease from -107.2Bn to 116.2Bn this month, with the previous month having a more significant 23.5Bn decrease.


The Dollar is well bid against most major currencies overnight. Later today, there are several significant releases from the US. Firstly, the Unemployment claims for the month, which measures the number of first-time unemployment insurance claims for the past week. The forecast is currently at 226K, however previous reporting has shown a positive trend of beating the forecasts. In the late afternoon, we will be hearing from the Institute of Supply management for their Services Purchasing managers Index report, which measures the relative level of business conditions across the US. The current forecast is 53.1, and with previous months reporting deviating significantly from each other, there is no clear trend that is presented.


Stocks deepened a slump, unravelling more of this year’s high-powered rally as Treasuries added to their decline. Investors braced for another interest rate increase from the Bank of England later Thursday. Treasuries extended their selloff, pushing 10-year yields to around 4.15%, the highest this year, following hot labour-market data and a ramp-up in US government debt issuance. European stocks fell 1% as they retreated for a third day. US contracts signalled further weakness after the worst session in three months for the S&P 500. The US benchmark slipped 1.4% Wednesday while the Nasdaq 100 fell 2.2%.

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

8:00 a.m.: Germany June Trade Balance
8:30 a.m.: Switzerland July CPI
8:30 a.m.: Sweden July Swedebank/Silf Services PMI
8:45 a.m.: France June Budget Balance
9:00 a.m.: Turkey July CPI
9:15 a.m.: Spain July HCOB Composite, Services PMIs
9:45 a.m.: Italy July HCOB Composite, Services PMIs
9:50 a.m.: France July HCOB Composite, Services PMIs
9:55 a.m.: Germany July HCOB Composite, Services PMIs
10:00 a.m.: Euro-area July HCOB Composite, Services PMIs
10:30 a.m.: UK July S&P Global/CIPS Composite, Services PMIs
11:00 a.m.: Euro-area June PPI
1:00 p.m.: BOE Monetary Policy
1:30 p.m.: BOE Governor Andrew Bailey press conference
2:30 p.m.: US Initial Jobless Claims
3:00 p.m.: BOE releases its monthly decision maker panel survey
4:00 p.m.: US Factory Orders, Durable Goods Orders

Corporate Events

Earnings include Amazon, Apple, Stryker


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