June 02, 2023

Daily Report 02/06/2023

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UK mortgage approvals declined to 48,700 for April from a revised 51,500 the previous month and well below consensus forecasts of 54,000. There was also a net decline in mortgage lending. Excluding the covid period, this was the largest decline in lending since the survey started in 1993. Although the overall increase in consumer credit held steady at £1.59bn for the month, the overall increase in lending was held to £0.2bn from £1.6bn previously.

Sterling was resilient despite reservations surrounding the housing sector with expectations of further Bank of England rate hikes continuing to provide net currency support. After holding, Sterling moved higher to trade significantly higher and regained higher levels against the US Dollar.  The latest Bank of England survey recorded that firms plan a slower rate of prices and wages over the next few months. Overall inflation expectations did, however, move higher on the month.

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The Euro-Zone PMI manufacturing index was revised slightly higher to 44.8 from the flash reading of 44.6. The headline Euro-Zone inflation rate declined to 6.1% for May from 7.0% for April and below consensus forecasts of 6.3%. The core rate also declined to 5.3% from 5.6% and below expectations of 5.3%.
The Euro managed to resist further selling despite weaker than expected data with the Euro holding just above key levels. ECB President Lagarde maintained a hawkish policy stance with comments that interest rates needed to increase further and that the bank cannot say that it is satisfied with the inflation outlook.

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US ADP data recorded an increase in private payrolls of 278,000 for May following a revised 291,000 increase the previous month and above consensus forecasts of 175,000. The gains were concentrated in the leisure sector and there was a significant decline in manufacturing jobs. There was a further slowdown in wages growth, especially for job changers. The dollar briefly strengthened after the data, but failed to hold the gains and the Euro recovered ground. The ISM May manufacturing index edged lower to 46.9 from 47.1 which was marginally below consensus forecasts and the seventh successive reading in contraction territory. Production did increase marginally for the month, but new orders contracted at a faster rate. Employment also increased slightly on the month while prices moved slightly lower on the month with the index below 45.0.

Key Data

Nonfarm Payrolls(May) Prev 253k Exp 190k