December 13, 2022

“Sterling edged slightly lower against the dollar after the release of UK labour market data this morning, which showed the ILO Unemployment rate rose from 3.6% to 3.7% in October as anticipated. Later today, US inflation data for November is due, which is the final significant US data release before the Fed wraps up its policy review tomorrow.”

 Sam Cornford, Partner – Head of Trading

Main Headlines

US scientists set to reveal they have achieved ‘holy grail’ of getting more energy out of a fusion reaction than it took to trigger it. Since nuclear fusion research began in the 1950s, researchers have been unable to a demonstrate a positive energy gain, a condition known as ignition. That was, it seems, until now.  Nuclear fusion involves smashing together light elements such as hydrogen to form heavier elements, releasing a huge burst of energy in the process. The approach, which gives rise to the heat and light of the sun and other stars, has been hailed as having huge potential as a sustainable, low-carbon energy source.

Wage growth in the UK’s private sector accelerated in the three months to October as inflation rose into double digits, according to data which promises to fuel an increasingly bitter stand-off between ministers and unions. Annual growth of 6.9 per cent in regular weekly earnings, excluding bonuses, was the highest outside the pandemic period in the private sector, the Office for National Statistics said today, although workers have seen their pay fall sharply in real terms as consumer prices have risen even faster.

GBP

Sterling is weaker than most major currencies in the early morning trade. Britons face the start of another six days of travel misery today as the rail network grinds to a halt because of strikes. Four days of industrial action this week will leave just 20 per cent of services running on strike days. ‘The UK economy will get worse before it gets better’ Jeremy Hunt has said, after figures revealed it shrank further between August and October. The economy contracted by 0.3% during the three months as soaring prices hit businesses and households and the UK is forecast to be heading into recession.

EUR

Euro is well bid against most major currencies overnight. EU energy ministers meet today to hash out a deal on capping natural gas prices. Under the commission’s proposal, the gas market correction mechanism would kick in when the price of month-ahead contracts on the Dutch Title Transfer Facility exceeds €275 per megawatt hour and the gap between world prices rises above €58. The EU reached a preliminary pact to provide crucial aid to Ukraine after Hungary dropped its opposition in exchange for a reduction in penalties over graft concerns.

USD

The dollar is stronger against sterling and weaker against euro this morning. Banks, trading firms and brokers are bracing for the biggest overhaul of US stock trading in almost two decades with the release on Wednesday of plans designed primarily to lower costs for small investors. The Securities and Exchange Commission is set to vote on four proposals aimed at pushing brokers and market-making firms to execute deals at the best price available and prove this was done. The pace of US consumer price growth is set to have slowed again in November.

Markets

US index futures and European equities were steady amid forecasts inflation in the world’s largest economy will post the lowest figure this year, warranting a less hawkish Federal Reserve. Contracts on the S&P 500 and Nasdaq 100 rose less than 0.1% after the underlying indexes climbed on Monday by the most in December. The Stoxx 600 gauge was little changed. The dollar weakened for the first time in three days. Treasuries gained, diverging from European bonds that fell. Oil rallied on signs of further easing in China’s Covid rules.

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

8:00 a.m.: Germany Nov. CPI
8:00 a.m.: UK Oct. Unemployment Rate
8:00 a.m.: Turkey Oct. Industrial Production
10:00 a.m.: Italy Oct. Industrial Production
11:00 a.m.: Germany Dec. ZEW survey
11:30 a.m.: BOE publishes financial stability report
2:30 p.m.: US Nov. CPI
US House financial services committee holds FTX initial hearing
Two-day FOMC meeting starts

Corporate Events

Earnings include Didi Global

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