November 30, 2022

“The euro edged slightly higher this morning, supported by a hawkish ECB speech ahead of today’s CPI reading. The greenback was buoyed as risk appetite remained muted overnight, however, the currency retreated further amid a better market mood this morning. All eyes are on the Eurozone inflation data, US Q3 GDP and Fed Chair Powell’s speech today.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Congressional leaders left a meeting with President Joe Biden yesterday resolving to both quickly avert a national railroad strike in the coming weeks and negotiate a $1.5 trillion-plus year-end spending bill in the coming days. Senate Majority Leader Chuck Schumer said the Senate will work to pass a railroad agreement as soon as possible after the House takes it up, likely today. The railroad industry, its unions and government officials have negotiated for months on a worker contract, but with a potential strike looming as soon as Dec. 9 Biden has called on Congress to step in and impose the current agreement, which some unions have deemed insufficient.

Homebuyers in the UK face higher interest costs, as lending figures slump to lowest monthly total since June 2020. The chaos in the mortgage market that followed Kwasi Kwarteng’s now infamous mini-budget led to a 10% fall in the number of mortgage approvals during October. According to the latest figures from the Bank of England, the number of mortgages approved by lenders slumped from 66,000 in September to 59,000 last month – the lowest monthly total for mortgage approvals since June 2020. More than 40% of the mortgage market disappeared almost overnight, leaving many homebuyers without a firm loan offer. Although, calm was restored by the reversal of most of the mini-budget, but homebuyers are still facing much higher interest costs.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. Britain’s energy watchdog has proposed price controls for electricity distribution network companies for the next five years that it said would deliver cheaper and cleaner power at no extra cost to consumers. The controls, which will run from April 1, 2023, to 2028, require six electricity distribution network companies to focus investment on reducing dependence on imported fossil fuels, regulator Ofgem said in a statement today. Businesses and households across Europe have been stretched by a surge in energy prices that began as the world emerged from COVID-19 lockdowns and then surged in February as a result of the invasion of Ukraine by leading gas exporter Russia.

EUR

Euro is well bid against most major currencies overnight. The European Commission will decide today whether Hungary’s new anti-corruption measures are sufficient to escape the freezing of European funds. This follows a recommendation by the Commission to the Council and the European Parliament in September to vote against the allocation of €7.5 billion in cohesion funds, due to “systemic irregularities” observed in public procurement in Hungary. Budapest is confident that EU states, who are responsible for the final decision, will not withhold the funds through the rule of law mechanism. Brussels has previously urged members not to give in to pressure from Hungary.

USD

The dollar is weaker than most major currencies in the early morning trade. The US dollar is heading toward its worst performing month since September 2010. It appears that the market is hoping for a softening stance from the Federal Reserve despite direct comments to the contrary. Later today, we Fed Chair Jerome Powell’s comments will be watched closely. Mr Powell’s comments could see a shift in US real yields, which might flow into a US Dollar move. Investors are closely watching the Federal Reserve ahead of its December meeting, where the central bank is largely expected to deliver a smaller 0.5 percentage point rate hike after four consecutive 0.75 percentage point increases to tame high inflation.

Markets

European markets were higher this morning as regional investors monitored the latest inflation data from the euro zone in November. The pan-European Stoxx 600 was up 0.8% in early trade, with autos adding 1.8% to lead gains as all sectors and major bourses entered positive territory. Stock futures inched up this morning as Wall Street awaits today’s speech from Federal Reserve Chair Jerome Powell that may give further insight into future rate hikes. Futures tied to the Dow Jones Industrial Average rose 50 points, or 0.14%. S&P 500 futures and Nasdaq 100 futures rose 0.16% and 0.17%, respectively. The moves come after a mixed day for stocks. The Nasdaq Composite shed 0.59% and the S&P 500 lost 0.16%, their third negative days in a row.

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

7:00 a.m.: Finland 3Q GDP
8:00 a.m.: Denmark Oct. Unemployment, 3Q GDP
8:45 a.m.: France Nov. CPI; Oct. PPI; 3Q GDP
9:00 a.m.: Spain Oct. Retail Sales
9:00 a.m.: Austria Oct. PPI
9:30 a.m.: BOE’s Huw Pill speaks
9:30 a.m.: Riksbank’s Floden speaks
9:55 a.m.: Germany Nov. Unemployment
10:00 a.m.: Italy 3Q GDP
10:00 a.m.: ECB’s Makhlouf speaks
10:30 a.m.: Portugal Nov. CPI
11:00 a.m.: Euro-area Nov. CPI
11:00 a.m.: Italy Nov. CPI
11:30 a.m.: Germany to sell bonds
12:00 p.m.: Portugal 3Q GDP; Oct. Retail Sales
12:00 p.m.: Ireland Nov. CPI
1:00 p.m.: South Africa Oct. Trade
2:30 p.m.: US 3Q GDP
4:30 p.m.: EIA Crude Oil Inventory Report
Jerome Powell speaks
Fed releases its Beige Book
The Berlin Security Conference begins

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