The dollar has advanced further amid a continuing rise in US bond yields, strengthening to $1.0580 against the euro and to $1.2180 against sterling. This in turn leaves EUR/£ still hovering just below 87p this morning.
Yesterday’s Events
In the rates market, longer term sovereign bond yields reached new highs yesterday in both the US and Europe, as the “higher-for-longer” message that the G3 Central Banks have been communicating takes hold. Yields are now at levels not seen in over a decade in the US and Europe across large parts of the curve.
European equity markets were under pressure yesterday, shedding around 1%, while the S&P 500 in the US reversed early losses to close up almost 0.5% on the day (though trading in the futures market suggests these modest gains may prove short-lived).
Fed member Kashkari says if the US economy “is fundamentally much stronger than we realized, on the margin that would tell me (interest) rates probably have to go a little bit higher and then be held higher for longer to cool things off,”
ECB’s Lagarde reiterates that, based on the central bank’s “current assessment”, interest rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”
Business confidence in Germany slipped in September according to the latest ifo survey, which notes that “sentiment in the economy remains bleak” with companies less satisfied with their current business situation” than in August.
The Day Ahead
Economic data due today includes consumer confidence, new home sales and house prices in the US.
Author: Patrick Chan
Tel: 1800 30 30 03 / +353 (0)1 790 0000
25 Sep 2023
Today's Talking Points 25.09.23
Market Commentary
Sterling lost more ground against the dollar and the euro on Friday following the release of weaker than expected UK PMI data and kicks off this morning trading at $1.2250 and 87p respectively. The single currency was little changed against the dollar on Friday (albeit still well off its intra-week high of $1.0740) and is trading at around $1.0650 at the off today.
Yesterday’s Events
The UK and Euro area economies contracted in September judging by PMI data published on Friday, with the composite PMI for the UK falling further below the key 50 level this month (to 46.8) and the equivalent index for the Euro area remaining below 50 for a fourth consecutive month albeit improving a little to 47.1 (from 46.7 in August). In the case of the US, the economy effectively stagnated for a second consecutive month in September, based on the composite PMI reading of 50.1 (after 50.2 in August).
Fed Governor Michelle Bowman says inflation in the US “is still too high”, and she expects “it will likely be appropriate…to raise (interest) rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal”. Similarly, her colleague, Susan Collins says rates may have to stay higher for longer than previously expected, adding that “further tightening is certainly not off the table.”
ECB’s Philip Lane says the choice between holding interest rates and hiking by by 25bps at its recent meeting “was finely balanced”, with the ultimate decision to hike “motivated by…the significant disinflation that is still required to return to our (2%) target in a timely manner.
The Day Ahead
It is quiet on the economic front today, though a number of ECB members are scheduled to speak including President Lagarde. The key data of the week will be on Friday, with the release of the Euro area flash inflation reading for September and PCE inflation for August in the US.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
22 Sep 2023
Today's Talking Points 22.09.23
Market Commentary
Sterling has lost ground after the Bank of England decided to leave interest rates unchanged following its latest monetary policy meeting – slightly wrongfooting the market which had lent towards a rate hike – though it is off its lows trading at $1.2260 against the dollar and at around 86.7p to the euro. The single currency, meanwhile, has fallen to around $1.0620 against the dollar after the release of soft September PMI readings for France this morning.
Yesterday’s Events
The Bank of England’s decision to keep interest rates on hold at 5.25% was a very close call, with four of the nine members of its Monetary Policy Committee (MPC) voting for a 25bps hike to 5.5%. The MPC noted that policy is ‘restrictive’, which if maintained for ‘sufficiently long’ will help return inflation to target. However, it did warn that ‘further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
Retail sales in the UK partially recovered in August according to data published earlier this morning, with volumes rising by 0.4% following a (part poor weather-related) decline of 1.1% in July. On an annual basis, sales were almost 1.5% lower than in August last year. More positively, consumer confidence improved in September, according to the GfK index.
ECB’S Knot (one of its more hardline members) says he is “satisfied at the moment with where we are with monetary policy because I believe that at this interest rate level we have a credible prospect of inflation returning to 2% in 2025”, while similarly, his colleagues Stournaras says he thinks the central bank “has reached the interest-rate peak.”
European PMIs have been quite mixed so far this morning with France coming in lower than expected and Germany’s release better than forecast with a noted improvement in services, however they continue to remain below 50 and deep in contractionary territory.
The Day Ahead
Economic data due today includes flash PMIs for September for the Euro area, UK and US. The August PMIs pointed to contracting economic activity in the Euro area and UK, and a slowdown in the pace of activity in the US.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
21 Sep 2023
Today's Talking Points 21.09.23
Market Commentary
US bond yields are higher and the dollar is firmer following yesterday’s Fed meeting, at which the central bank left interest rates on hold but indicated it could hike again before the end of this year and pared back the extent of rate cuts next year.
The dollar has strengthened to around $1.0640 and $1.2320 against the euro and sterling respectively, from around $1.0725 and $1.24 just before the interest rate announcement, which in turn leaves EUR/£ still hovering just below 86.5p this morning.
Yesterday’s Events
The Fed left interest rates unchanged in a range of 5.25% to 5.5% following yesterday’s meeting. It revised up its forecast for GDP growth in 2023 and 2024, though growth is still seen slowing next year, and lowered its forecast for the unemployment rate for these two years, though it is still seen nudging higher in 2024. while headline and core PCE inflation are projected to fall to 2.5% and 2.6% respectively next year (both unrevised), from 3.3% and 3.7% this year.
In terms of the outlook for monetary policy, the Fed indicated it could hike interest rates one more time (to 5.5%-5.75%) before the end of this year, if appropriate, and scaled back the extent of rate cuts in 2024 and 2025 by around 50bps for each year (to 5%-5.25% and 3.75%-4% respectively). Markets are pricing less than 50bps of cuts now for 2024
The Day Ahead
The Bank of England (BoE) announces its latest interest rate decision at noon today. Notwithstanding yesterday’s better than expected inflation data, notably the decline in core inflation, the ongoing strength of wage growth in the economy may persuade the BoE to nudge up rates by anther 25bps to 5.5%, while keeping the door open to doing more later if needed.
On the economic data front today, we get consumer confidence in the Euro area and jobless claims and existing home sales in the US.
Author: Ellen Moloney
Tel: 1800 30 30 03 / +353 (0)1 790 0000
20 Sep 2023
Today's Talking Points 20.09.23
Market Commentary
Sterling is a bit softer this morning following some weaker than expected UK inflation data and is trading at just under $1.235 against the dollar and at 86.5p against the euro. The dollar is mostly unchanged this morning against the single currency ahead of the Fed’s latest interest rate decision later today, and is trading at a little under $1.07.
Yesterday’s Events
The annual rate of headline CPI inflation in the UK decelerated to 6.7% in August from 6.8% in July (when a pick-up to 7.0% was the consensus forecast), according to this morning’s ONS data. Core inflation also fell to 6.2% from 6.9%.
The market is now pricing just 15bps into tomorrow’s BoE meeting, down from 22bps yesterday.
The OECD has published updated economic forecasts, noting that the impact of tighter central bank monetary policy is becoming “increasingly visible” and projecting global GDP growth of 3% in 2023 (a touch higher than forecast in June) and 2.7% in 2024 (a touch lower than in June).
The OECD expects annual GDP growth in the US to average 2.2% this year, much the same as in 2022, slowing to 1.3% in 2024, while Euro area growth is projected to ease to 0.6% this year, from 3.5% last year, before edging up to 1.1% in 2024. Growth in the UK, meanwhile, is forecast to average 0.3% and 0.8% in 2023 and 2024 respectively.
The final reading for Euro area headline CPI inflation in August was revised down a touch to 5.2% from 5.3% in the flash estimate, but core inflation was unrevised at 5.3% (after 5.5% in July).
The Day Ahead
The Fed is likely to leave its key interest rate unchanged at 5.25%-5.5% when it concludes its monetary policy meeting this evening, while it is quiet on the data front with Euro area construction output the only release of note.
Dealer Comments
Today's Talking Points 26.09.23
Market Commentary
The dollar has advanced further amid a continuing rise in US bond yields, strengthening to $1.0580 against the euro and to $1.2180 against sterling. This in turn leaves EUR/£ still hovering just below 87p this morning.
Yesterday’s Events
In the rates market, longer term sovereign bond yields reached new highs yesterday in both the US and Europe, as the “higher-for-longer” message that the G3 Central Banks have been communicating takes hold. Yields are now at levels not seen in over a decade in the US and Europe across large parts of the curve.
European equity markets were under pressure yesterday, shedding around 1%, while the S&P 500 in the US reversed early losses to close up almost 0.5% on the day (though trading in the futures market suggests these modest gains may prove short-lived).
Fed member Kashkari says if the US economy “is fundamentally much stronger than we realized, on the margin that would tell me (interest) rates probably have to go a little bit higher and then be held higher for longer to cool things off,”
ECB’s Lagarde reiterates that, based on the central bank’s “current assessment”, interest rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”
Business confidence in Germany slipped in September according to the latest ifo survey, which notes that “sentiment in the economy remains bleak” with companies less satisfied with their current business situation” than in August.
The Day Ahead
Economic data due today includes consumer confidence, new home sales and house prices in the US.
25 Sep 2023
Today's Talking Points 25.09.23
Market Commentary
Sterling lost more ground against the dollar and the euro on Friday following the release of weaker than expected UK PMI data and kicks off this morning trading at $1.2250 and 87p respectively. The single currency was little changed against the dollar on Friday (albeit still well off its intra-week high of $1.0740) and is trading at around $1.0650 at the off today.
Yesterday’s Events
The UK and Euro area economies contracted in September judging by PMI data published on Friday, with the composite PMI for the UK falling further below the key 50 level this month (to 46.8) and the equivalent index for the Euro area remaining below 50 for a fourth consecutive month albeit improving a little to 47.1 (from 46.7 in August). In the case of the US, the economy effectively stagnated for a second consecutive month in September, based on the composite PMI reading of 50.1 (after 50.2 in August).
Fed Governor Michelle Bowman says inflation in the US “is still too high”, and she expects “it will likely be appropriate…to raise (interest) rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal”. Similarly, her colleague, Susan Collins says rates may have to stay higher for longer than previously expected, adding that “further tightening is certainly not off the table.”
ECB’s Philip Lane says the choice between holding interest rates and hiking by by 25bps at its recent meeting “was finely balanced”, with the ultimate decision to hike “motivated by…the significant disinflation that is still required to return to our (2%) target in a timely manner.
The Day Ahead
It is quiet on the economic front today, though a number of ECB members are scheduled to speak including President Lagarde. The key data of the week will be on Friday, with the release of the Euro area flash inflation reading for September and PCE inflation for August in the US.
22 Sep 2023
Today's Talking Points 22.09.23
Market Commentary
Sterling has lost ground after the Bank of England decided to leave interest rates unchanged following its latest monetary policy meeting – slightly wrongfooting the market which had lent towards a rate hike – though it is off its lows trading at $1.2260 against the dollar and at around 86.7p to the euro. The single currency, meanwhile, has fallen to around $1.0620 against the dollar after the release of soft September PMI readings for France this morning.
Yesterday’s Events
The Bank of England’s decision to keep interest rates on hold at 5.25% was a very close call, with four of the nine members of its Monetary Policy Committee (MPC) voting for a 25bps hike to 5.5%. The MPC noted that policy is ‘restrictive’, which if maintained for ‘sufficiently long’ will help return inflation to target. However, it did warn that ‘further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”
Retail sales in the UK partially recovered in August according to data published earlier this morning, with volumes rising by 0.4% following a (part poor weather-related) decline of 1.1% in July. On an annual basis, sales were almost 1.5% lower than in August last year. More positively, consumer confidence improved in September, according to the GfK index.
ECB’S Knot (one of its more hardline members) says he is “satisfied at the moment with where we are with monetary policy because I believe that at this interest rate level we have a credible prospect of inflation returning to 2% in 2025”, while similarly, his colleagues Stournaras says he thinks the central bank “has reached the interest-rate peak.”
European PMIs have been quite mixed so far this morning with France coming in lower than expected and Germany’s release better than forecast with a noted improvement in services, however they continue to remain below 50 and deep in contractionary territory.
The Day Ahead
Economic data due today includes flash PMIs for September for the Euro area, UK and US. The August PMIs pointed to contracting economic activity in the Euro area and UK, and a slowdown in the pace of activity in the US.
21 Sep 2023
Today's Talking Points 21.09.23
Market Commentary
US bond yields are higher and the dollar is firmer following yesterday’s Fed meeting, at which the central bank left interest rates on hold but indicated it could hike again before the end of this year and pared back the extent of rate cuts next year.
The dollar has strengthened to around $1.0640 and $1.2320 against the euro and sterling respectively, from around $1.0725 and $1.24 just before the interest rate announcement, which in turn leaves EUR/£ still hovering just below 86.5p this morning.
Yesterday’s Events
The Fed left interest rates unchanged in a range of 5.25% to 5.5% following yesterday’s meeting. It revised up its forecast for GDP growth in 2023 and 2024, though growth is still seen slowing next year, and lowered its forecast for the unemployment rate for these two years, though it is still seen nudging higher in 2024. while headline and core PCE inflation are projected to fall to 2.5% and 2.6% respectively next year (both unrevised), from 3.3% and 3.7% this year.
In terms of the outlook for monetary policy, the Fed indicated it could hike interest rates one more time (to 5.5%-5.75%) before the end of this year, if appropriate, and scaled back the extent of rate cuts in 2024 and 2025 by around 50bps for each year (to 5%-5.25% and 3.75%-4% respectively). Markets are pricing less than 50bps of cuts now for 2024
The Day Ahead
The Bank of England (BoE) announces its latest interest rate decision at noon today. Notwithstanding yesterday’s better than expected inflation data, notably the decline in core inflation, the ongoing strength of wage growth in the economy may persuade the BoE to nudge up rates by anther 25bps to 5.5%, while keeping the door open to doing more later if needed.
On the economic data front today, we get consumer confidence in the Euro area and jobless claims and existing home sales in the US.
20 Sep 2023
Today's Talking Points 20.09.23
Market Commentary
Sterling is a bit softer this morning following some weaker than expected UK inflation data and is trading at just under $1.235 against the dollar and at 86.5p against the euro. The dollar is mostly unchanged this morning against the single currency ahead of the Fed’s latest interest rate decision later today, and is trading at a little under $1.07.
Yesterday’s Events
The annual rate of headline CPI inflation in the UK decelerated to 6.7% in August from 6.8% in July (when a pick-up to 7.0% was the consensus forecast), according to this morning’s ONS data. Core inflation also fell to 6.2% from 6.9%.
The market is now pricing just 15bps into tomorrow’s BoE meeting, down from 22bps yesterday.
The OECD has published updated economic forecasts, noting that the impact of tighter central bank monetary policy is becoming “increasingly visible” and projecting global GDP growth of 3% in 2023 (a touch higher than forecast in June) and 2.7% in 2024 (a touch lower than in June).
The OECD expects annual GDP growth in the US to average 2.2% this year, much the same as in 2022, slowing to 1.3% in 2024, while Euro area growth is projected to ease to 0.6% this year, from 3.5% last year, before edging up to 1.1% in 2024. Growth in the UK, meanwhile, is forecast to average 0.3% and 0.8% in 2023 and 2024 respectively.
The final reading for Euro area headline CPI inflation in August was revised down a touch to 5.2% from 5.3% in the flash estimate, but core inflation was unrevised at 5.3% (after 5.5% in July).
The Day Ahead
The Fed is likely to leave its key interest rate unchanged at 5.25%-5.5% when it concludes its monetary policy meeting this evening, while it is quiet on the data front with Euro area construction output the only release of note.