June 09, 2023

Daily Report 09/06/2023

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There were no significant UK developments on Thursday with Sterling gaining an element of protection from expectations that the Bank of England would be aggressive in raising interest rates. The UK currency gained fresh support as US yields moved lower and there was also support from gains in US equities. Markets were still wary over the threat of higher global interest rates. As the dollar lost ground, Sterling tested weekly highs and a break above this level triggered further gains.  The Euro also registered net losses against the Pound with some interest in carry trades.

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The Euro edged higher after Thursday’s European, although tight ranges prevailed as markets waited for major developments. Euro-Zone GDP data was revised to show a 0.1% decline for the first quarter of 2023 compared with the flash estimate of 0.1%, maintaining underlying reservations surrounding the Euro-Zone outlook with the economy registering a technical recession. Markets still expect that the ECB will increase interest rates in June and July which provided Euro support.

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US initial jobless claims increased to 261,000 in the latest week from a revised 233,000 previously. This was well above consensus forecasts of 235,000 and the highest reading since October 2021, although the increase in claims was concentrated in two states. Continuing claims declined to 1.76mn from 1.79mn the previous week. The higher figure for initial claims triggered fresh concerns that the labour market was weakening, although the data overall has not provided a clear signal over the past few months. Firmer equities also provided net support for the Euro. The dollar overall lost ground and the Euro secured a further net advance to new highs.

On Friday, there will be significant position adjustment ahead of the weekend, especially with the Federal Reserve and ECB both announcing their latest policy decisions next week.

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