Morning Report

July 14, 2023

“Increased risk appetite alongside further US dollar weakness has caused some of the largest moves of the year yesterday. We look to the US Preliminary Consumer Sentiment and Preliminary Inflation Expectations reports later today to ascertain if this rally continues. Additionally, there are ongoing ECOFIN meetings in Brussels, and we will closely monitor the statements made during these discussions.”

Sam Cornford, Partner – Head of Trading

Main Headlines

A potential strike at United Parcel Service in the United States could have severe financial consequences, estimated to be over $7 billion for a 10-day work stoppage, according to a specialized think tank, the Anderson Economic Group. This estimate includes customer losses of $4 billion for UPS and direct wage losses of over $1 billion. In 1997, a 15-day UPS strike disrupted the supply chain, resulting in a cost of $850 million for the world’s largest parcel delivery company and driving some customers to competitors such as FedEx. In other news, The US Treasury Department announced that the US government recorded a budget deficit of $228 billion in June, a 156% increase compared to the previous year. The deficit was attributed to weakened revenues and the acceleration of July benefit payments into June. In June, receipts declined by $42 billion to $418 billion, while outlays increased by $96 billion to $646 billion.

In an attempt to put an end to prolonged public sector strikes, British Prime Minister Rishi Sunak proposed pay raises of 6% and above for teachers, doctors, and other workers. However, he cautioned that such increases would come at a significant cost, potentially leading to cuts in other areas. He stated that he had accepted the recommendations of independent pay review boards regarding wage hikes for public sector employees, emphasizing that it represented a final offer aimed at resolving months of industrial action. Implementing this package would require allocating an additional £5 billion, with £2 billion to be allocated this year and £3 billion the following year, from existing departmental budgets.


Sterling is weaker than most major currencies in the early morning trade. The UK’s public debt is projected to potentially surpass 300% of annual economic output by the 2070s, a significant increase from the current level of about 100%. The government’s budget forecasters have warned of the absence of immediate measures to tackle this issue. The Office for Budget Responsibility (OBR) highlighted the substantial fiscal risks posed by an ageing population, climate change, and geopolitical tensions. However, the OBR’s annual report on long-term public finances, published on Thursday, revealed that the UK’s plans to stabilize and reduce debt as a percentage of gross domestic product (GDP) are relatively modest compared to historical and international standards. In other news, British food price inflation is expected to decrease in the latter part of 2023, with an estimated rate of around 9% in December, as projected by a leading grocery industry researcher, the IGD. It emphasized that a significant recovery in sales volume is not anticipated until next year and stated that they expect a gradual and steady decline in food price inflation throughout the rest of 2023, reaching approximately 9% by December.


The Euro is stronger against Sterling and weaker against the Dollar this morning. Today, we anticipate the release of the Eurostat trade balance report, which assesses the disparity in value between imports and exports of goods and services for the entire Eurozone during the reported month. Recent reports have shown mixed results, with the previous month’s figure falling short of the forecast by 23.9 billion. The current forecast for this month is -10.3 billion, and we eagerly await the actual figures. Additionally, there are several EU Economic and Financial Affairs Council meetings taking place in Brussels, attended by Finance Ministers from EU member states. These meetings serve to coordinate economic policies among the 28 member states, and their decisions can significantly impact the economic well-being of the Eurozone. Throughout the day, we will closely monitor the statements made during these meetings.


The Dollar is well bid against most major currencies overnight. This afternoon, we will receive two significant reports from the University of Michigan. The first is the Preliminary Consumer Sentiment report, which surveys 500 consumers to assess their perception of current and future economic conditions. Recent reports have shown a mixed trend, with alternating surplus and deficit. The current forecasted figure stands at 65.5, and we are eager to see this month’s results. The second report, the Preliminary Inflation Expectations, measures consumers’ anticipated percentage change in the price of goods and services over the next 12 months. These expectations can influence real inflation, as workers tend to demand higher wages when they anticipate rising prices. Recent reports have indicated a gradual decline in consumer expectations, and we will monitor if this trend persists.


A rally in global stocks paused on Friday, though still on track for the best week since March, as earnings season in Europe and the US started to swing into gear. The Stoxx Europe 600 index was little changed at the open. Luxury-goods maker Burberry Group Plc slipped after reporting slowing sales growth in the Americas and a smaller-than-expected rebound in China. Swiss money manager Partners Group Holding AG gained more than 3% after assets under management rose in the first half.

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

7:00 a.m.: Finland June CPI
8:00 a.m.: Sweden June CPI
8:30 a.m.: Switzerland June Producer & Import Prices
10:00 a.m.: Poland June CPI
11:00 a.m.: Euro-area May Trade Balance
12:00 p.m.: Ireland 1Q GDP
3:00 p.m.: Bank of Italy releases Quarterly Economic Bulletin
France celebrates Bastille Day


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