May 9, 2023

“Trader’s focus will be concentrated on the US inflation data release tomorrow and the BoE rate decision on Thursday, both of which could be market movers. Additionally, one eye will be kept on President Biden’s meeting with congressional leaders to address the ongoing challenges surrounding the US debt ceiling.”

Sam Cornford, Partner – Head of Trading

Main Headlines

President Joe Biden, alongside key Republicans and Democrats in Congress are scheduled to meet this week to resolve a three-month deadlock concerning the $31.4 trillion U.S. debt ceiling. The aim is to avert a detrimental default before the end of May. President Biden is urging lawmakers to raise the borrowing limit of the federal government without any conditions attached. However, Republican House of Representatives Speaker Kevin McCarthy has stated that his chamber will not support any agreement that does not include spending cuts to address the expanding budget deficit.

Rishi Sunak is under renewed pressure to prioritize home building following his party’s significant losses in local elections, which were attributed to the housing crisis. The government is intensifying its efforts to urge financial regulators to take further action in stimulating economic growth. And according to the recent MLIV Pulse survey, investors anticipate the UK to experience the most significant decline in its standard of living among developed economies this year. Regarding UK assets in 2023, the FTSE 100 is expected to perform better than sovereign bonds, the FTSE 250, and residential property, while US Treasuries may dominate the market in the coming month.

GBP

Sterling is stronger against the Euro and weaker against the Dollar this morning. British house prices in April had the smallest annual increase since December 2012. Despite this recent market weakness, Halifax noted a reduced level of volatility, and following the economic plans announced by former prime minister Liz Truss in September, which caused disruption in the mortgage market, other indicators have shown a more stable housing market situation in recent months. In other news, British retail sales held steady in April, but high inflation affected shoppers’ purchasing power. The survey from the British Retail Consortium revealed a 5.1% increase in spending at BRC member stores compared to the previous year, aligning with March’s figures and significantly surpassing the 0.3% decline from a year ago. However, the reported sales increase does not account for inflation, concealing a notable decline in actual sales volumes.

EUR

The Euro is weaker than most major currencies in the early morning trade. ECB policymaker Peter Kazimir stated on Tuesday that the European Central Bank may need to maintain higher interest rates for a longer period than expected. He indicated that September would be the earliest opportunity to assess the effectiveness of previous rate hikes. In response to escalating inflation, the ECB has raised rates at its last seven meetings and signalled additional increases to address mounting inflationary pressures. Spain’s “golden visa” scheme, which offers residency rights to foreign real estate investors, may be discontinued, as indicated by the leader of a left-wing party engaged in negotiations with the government. Iñigo Errejon stated on Monday that his Mas Pais party had reached a preliminary agreement with the Social Security Ministry to terminate the program. The scheme currently grants three-year residency permits to individuals and their families who invest at least 500,000 euros ($551,650) in property.

USD

The Dollar is well bid against most major currencies overnight. Democratic lawmakers have urged the Biden administration to evaluate the environmental impacts of expanding the liquefied natural gas (LNG) industry. They called for stricter scrutiny of the entire LNG supply chain and the finalization of guidance on greenhouse gas emissions and climate change. As Europe reduces gas imports from Russia following the Ukraine invasion, the Biden administration has approved LNG exports as a potential alternative. Today, we anticipate insights from New York Fed President John Williams at the Economic Club of New York. His remarks will shed light on their perspective regarding inflation, interest rates, and potentially offer hints about future economic planning in the United States.

Markets

European stocks and US equity futures edged lower as investors assessed the impact of slowing imports by China on its economic recovery and prepared for a key US inflation report. China’s imports dropped by a worse-than-expected 7.9%, which is raising questions about the country’s economic strength. The other event looming large for traders is Wednesday’s consumer-inflation data in the US, which will be parsed for clues on the Federal Reserve’s policy path.

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

9:30 a.m.: Riksbank minutes from April policy meeting
10:00 a.m.: ECB’s Lane speaks
11:00 a.m.: Austria to sell bonds
11:30 a.m.: Belgium to sell bills
11:30 a.m.: Germany to sell bonds
11:30 a.m.: Australian Government Budget
12:00 p.m.: Ireland March Factory Output
12:00 p.m.: Riksbank’s Floden speaks
12:00 p.m.: Finland to sell bonds
12:00 p.m.: ECB’s Vasle, Vujcic speak
2:50 p.m.: France to sell bills
7:00 p.m.: ECB’s Schnabel speaks
ECB Chief Economist Philip Lane participates in panel at IMF event
Russia holds annual Victory Day parades to mark defeat of Nazi Germany
Joe Biden scheduled to meet with congressional leaders on debt limit
Bloomberg Future of Finance Conference in Paris

Corporate Events

Earnings include Liberty Global, Daimler Truck

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