June 08, 2023

Daily Report 08/06/2023

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Sterling was resilient in early Europe on Wednesday with further support against the dollar and then posted significant gains around the New York open. The UK RICS housing index recovered to -30% for May from -39% the previous month and the new enquiries balance increased to a 12-month high. Another report, however, reported that the labour market had cooled with demand at a five-year low and a slowdown in salary growth.

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German industrial production increased 0.3% for April after a revised 2.1% decline the previous month, although slightly below consensus forecasts of a 0.6% increase. Reaction was limited with the Euro remaining under pressure after the European open amid underlying reservations over the outlook. ECB council member Knot stated that the outlook for interest rates beyond July is unclear with policy more dependent after rate hikes in June and July. He added that the bank should not hesitate to keep raising rates if inflation stays high. He did, however, add that prolonged higher rates might lead to financial stresses. According to council member Schnabel, a peak in underlying inflation would not be sufficient to declare victory and the bank needs to see convincing evidence that inflation is returning to the 2% target on a sustained and timely manner.

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10.00 Gross Domestic Product (QoQ) (Q1) Exp. 0% Prev. 0.1%
10.00 Gross Domestic Product (YoY) (Q1) Exp. 1.2% Prev. 1.3%

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The dollar overall was held in tight ranges ahead of Wednesday’s New York open with solid support on dips. The US trade deficit widened to a 6-month high of $74.6bn from $60.6bn previously with a decline in exports which will dampen GDP growth to some extent. There were still significant reservations surrounding the US economic outlook, especially with some high-frequency indicators suggesting that demand is faltering. There were no comments from Federal Reserve officials as the central bank remained in the blackout period ahead of next week’s policy decision.

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