Market Report : 16.05.23

Published: 16/05/2023 By ECAP

Sterling fell against its major counterparts this morning as investors readjusted their views on the likelihood of the BoE pausing its run of interest rate increases when its next meets in June. Rate futures put the case of such a pause at about 30%. The pound’s move follows the release of UK unemployment data which unexpectedly rose to 3.9% in the three months to March. The data also showed that growth in average total pay including bonuses was 5.8% and growth in regular pay excluding bonuses was 6.7% in January to March. However, despite continued growth in pay, people’s average earnings are still being outstripped by rising prices and double digit inflation.

The Euro see-sawed back and forth this morning as weak data from China fuelled concerns about an economic slowdown, while investors awaited more data on the euro zone economy. Market participants are now awaiting a flash estimate of euro zone GDP, Italy's April inflation reading and Germany's ZEW economic sentiment survey for May later in the day. This and a scheduled speech by the European Central Bank President Christine Lagarde should contribute to producing short-term volatility. Thus, lending a fresh directional impetus to the bloc’s single currency.
The US Dollar stabilized in early European trade and has been on a sustained recovery path following last week’s Consumer Price Index figures for April. Looking forward, the US Retail Sales report – to be released during today’s trading session – could have a significant impact on the US Dollar’s valuation amid a lack of high-impact economic data releases from the US docket this week. The headline number is forecast to increase 0.7% in April after posting the second straight monthly drop in March. Stronger than expected US Retail Sales data is likely to help ease economic worries at the expense of the Greenback. On the other hand, weaker Retail Sales data are likely to rekindle recession fears which could provide a fresh leg in the ongoing recovery of the safe-haven US Dollar.