August 15, 2023

Daily Report 15/08/2023

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Sterling secured a slight recovery after Monday’s European open as equities attempted to recovery from opening lows.  The UK labour-market data recorded an increase in the unemployment rate to 4.2% in the three months to June from 4.0% previously and employment declined. Wages data, however, was stronger than expected with headline earnings growth jumping to 8.2% from 7.2% previously and well above expectations of 7.3%. Underlying earnings also increased 7.8% from a revised 7.5% previously and above expectations of 7.4%. Stronger wages data will reinforce expectations of more aggressive Bank of England rate hikes. The latest UK inflation data will be released on Wednesday. There are expectations that the CPI index will decline 0.5% on the month due to an important extent from the cut in energy prices at the beginning of July. The headline year-on-year rate is forecast to decline to 6.8% from 7.9% previously and this would be the lowest reading since March 2022. The core rate is expected to be unchanged at 6.9%. Markets and the Bank of England will be monitoring inflation rates in the services sector closely.

No Key Data

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There were no significant data releases during Monday. The Euro overall remained under pressure with a lack of confidence in the Euro-Zone outlook. There were also further reservations surrounding the Chinese outlook which sapped single currency support. The Euro attempted to rally after the European open as equities recovered from lows, but made little headway and was capped against the dollar.

No Key Data

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The dollar was held against the yen after Monday’s European open with markets wary over the threat of Ministry of Finance verbal intervention to curb yen losses. US yields initially edged lower, but there was further selling in Treasuries around the New York open with US yields moving higher. Immediate fears surrounding the intervention threat also eased after the Asian close and the dollar secured a renewed push. As US yields moved higher, the dollar posted strong gains to 9-month highs before a retreat to 145.30 as Treasuries regained some ground. The latest New York Federal Reserve survey recorded a decline in 1-year inflation expectations to 3.5% from 3.8% and the lowest reading since April 2021. The 3 and 5-year expectations both declined to 2.9% from 3.0% previously.

Key Data 

13.30 Retail Sales (MoM) (Jul) Exp. 0.4% Prev. 0.2%
13.30 Retail Sales Control Group (Jul) Exp. 0.6% Prev. 0.6%