August 16, 2023

Daily Report 16/08/2023

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Sterling held a firm tone after the UK wages data amid expectations that the Bank of England would have to be more aggressive in hiking interest rates. There was fresh speculation over peak rates at 6.00%, although overall moves were relatively constrained, especially with risk conditions still broadly cautious. There was also inevitable caution ahead of the latest UK inflation release. The headline UK inflation rate declined sharply to 6.8% from 7.9% which was in line with expectations as retail energy prices fell sharply. The core rate held at 6.9% and marginally above expectations of 6.8%. The overall impact was muted.

No Key Data

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The German ZEW investor confidence index improved slightly to –12.3 for August from –14.7 previously and was stronger than consensus forecasts. There was, however, a further net deterioration in the current conditions component for the month, maintaining underlying unease over the outlook. The Euro overall was held in tight ranges ahead of the New York open.

Key Data 

9.00 Gross Domestic Product (QoQ) (Q2) Exp. 0.3% Prev. 0.3%
9.00 Gross Domestic Product (YoY) (Q2) Exp. 0.6% Prev. 0.6%

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US retail sales increased 0.7% for July after a revised 0.4% decline the previous month and above expectations of 0.4%. Underlying sales increased 1.0% for the month and well above market expectations of a 0.3% decline while the control group also posted a 1.0% gain on the month after a 0.5% gain previously. The New York Empire manufacturing index slumped to –19 for August from 1.1 previously and substantially weaker than the expected figure of –1. There were also sharp contractions in production and new orders for the month with unfilled orders also in contraction territory. There was also a net employment decline for the month, but inflation pressures increased with a net increase for prices paid and prices received. Companies were more optimistic over the outlook while pricing pressures are expected to be mixed.

Key Data

18.00 FOMC Minutes