September 30, 2022

“The halt in the greenback’s rally gathered fresh momentum, caused by the Chinese central bank intervention to protect the yuan by selling dollars in the market. The dollar’s value dropped by over 1 percent versus euro and around 2.5 percent against sterling. Sterling gained over 1 percent versus euro. The markets are anticipating a jumbo 124bps rate hike by BoE in November meeting.”

Sam Cornford, Partner – Head of Trading

Main Headlines

President Joe Biden yesterday said, “our entire country hurts” along with the people of Florida after Hurricane Ian flooded communities across the state, knocked out power, forced people into shelters and raised fears of a “substantial loss of life.” During a visit to the headquarters of the Federal Emergency Management Agency, where he was briefed on federal response efforts, the president said, “The numbers are still unclear, but we’re hearing early reports of what may be substantial loss of life.” Biden said he would visit Florida and meet with Republican Gov. Ron DeSantis when “conditions allow.” The president said he would also visit Puerto Rico, a US territory, that was slammed earlier this month by Hurricane Fiona.

A new 50p design featuring an image of King Charles III has been unveiled by the Royal Mint and will enter circulation by the end of the year. Meanwhile, a special memorial coin range commemorating Queen Elizabeth II will be released on Monday at 9am. Charles’ portrait will appear on a £5 crown and a 50p celebrating the Queen. The King’s effigy, which has received the personal approval of Charles, was created by sculptor Martin Jennings, the Mint said. As is tradition, the King’s portrait will face to the left, the opposite direction from Queen Elizabeth II.

GBP

Sterling is well bid against most major currencies overnight. The Prime Minister Liz Truss will hold emergency talks with the head of Britain’s independent fiscal watchdog after failing to dampen panic in the financial markets or shore up support from Tory MPs on her radical economic plan. In a highly unusual move, the prime minister will meet the Office for Budget Responsibility’s (OBR) Richard Hughes today, along with her chancellor, Kwasi Kwarteng, before being presented with a first draft of its full fiscal forecasts next week.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. Eurozone economic sentiment fell sharply and by more than expected in September, data showed yesterday, as confidence dropped among companies and consumers, who are also downbeat about price trends in the coming months. Confidence fell in all economic sectors, including industry, services, retail trade and among consumers, Commission’s data showed, amid a rise in inflation expectations across the board. Households’ confidence fell to -28.8 points from -25.0, as consumers expected a worsened financial situation over the next months and forecast cuts in their plans on major purchases. Inflation expectations rose in all surveyed sectors after falling in previous months despite European Central Bank’s pledge to fight soaring prices with multiple interest rate increases.

USD

The dollar is weaker than most major currencies in the early morning trade. Battered by surging consumer prices and rising interest rates, the United States economy shrank at a 0.6 percent annual rate from April through June, the government has announced, unchanged from its previous second-quarter estimate. The data released yesterday marked the second consecutive quarter of economic contraction, one informal rule of thumb for a recession. Most economists, citing a strong and resilient American job market, believe the world’s biggest economy is not yet in a downturn. But they worry that it might be headed for one as the US Federal Reserve ratchets up interest rates to combat inflation.

Markets

Risk appetite remains weak as concerns regarding the economic outlook continues to weight heavily on sentiment. The Euro Stoxx 50 fell by 1.7%. Meanwhile, The S&P 500 declined 2.1% to 3,640.47 in a new closing low for the year. During the session, it also fell to a new 2022 intraday low of 3,610.40. This is also its lowest intraday level since 2020. On bond markets, German Bund yield bear steepened by 5-12bps. In the UK, Gilts rose by 2-12bps, rising the most at the front-end, likely reflecting BoE purchases at the back-end of the curve. US Treasury yields declined by 5-8bps.

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

8:00 a.m.: UK Sept. Nationwide House Price
8:00 a.m.: UK 2Q GDP, Current Account
8:45 a.m.: France Sept. CPI
9:00 a.m.: Spain Aug. Retail Sales
9:00 a.m.: Czech 2Q GDP
9:00 a.m.: Turkey Aug. Trade Balance
9:55 a.m.: Germany Sept. Unemployment
10:30 a.m.: UK Aug. Mortgage Approvals, M4
11:00 a.m.: Euro-area Aug. Unemployment; Sept. CPI
11:00 a.m.: Italy Sept. CPI
12:00 p.m.: UK to sell bills
12:00 p.m.: Riksbank’s Jansson speaks
12:00 p.m.: Finnish Parliament Confidence Vote
1:00 p.m.: ECB’s Elderson speaks
2:30 p.m.: US Aug. PCE core deflator
3:00 p.m.: Russia 2Q Current Account
4:00 p.m.: Norges Bank 4Q Borrowing Plan
5:15 p.m.: ECB’s Visco speaks
5:30 p.m.: ECB’s Schnabel speaks
7:00 p.m.: Baker Hughes US rig count

Corporate Events

Earnings include Carnival Plc

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