Market Report : 10.05.23

Published: 10/05/2023 By ECAP

Yesterday saw a fairly flat day for Sterling in the market against the greenback and Euro off the back of a slightly weaker outlook for global equities. There was still some solid support backed by the expectation of a rate hike on Thursday. The persistence of inflation has a 25 point rate hike heavily backed in the futures market and the sentiment is that given inflation is likely to remain high, the BofE is likely to continue the hikes. Data wise there is little for GBP today, all eyes are on tomorrow's interest rate decision, MPC summary and Governor Bailey’s speech.

General consensus is that the ECB is nearing the end of their rate hiking cycle, with the Eurozone performing better than expected in 2023 predominantly due to falling gas prices. Whilst there is talk of the cycle coming to an end, the view is that little and often is still very much the gameplan meaning they can go higher for longer to help curb inflation. Confidence in the banking sector remains a risk factor for the single currency and with little to no data expected out of Europe this week, any movement will come from the UK or across the pond for the EUR.

Due to a lack of confidence in the US banking sector and some weakness in the economy, the USD has had a relatively tough few weeks. It is, however, starting to show a bit of life with strong employment data and Powell’s hawkish comments around rate cut speculation. US consumer prices is the main focus of today's news and if they come in higher than expected this will cast doubts over whether the US will keep interest rates lower in the back end of this year over inflation trends. If the data does come in higher we would expect some volatility.