May 19, 2023

Daily Report 19/05/2023

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In comments on Thursday, Bank of England Governor Bailey stated that he did not envisage the bank’s balance sheet returning to pre-crisis levels. Deputy Governor Ramsden, however, stated that the pace of quantitative tightening could rise from the current £80bn per year. There were no comments on interest rates at this session with the committee due to grill the bank on wider monetary policy trends at another session next week. There was little impact on Sterling with global moves tending to dominate. UK consumer confidence edged higher to a 15-month high for May, maintaining on-going expectations that the UK economy would prove resilient.

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The Euro was unable to make any further recovery after Thursday’s European open with the dollar maintaining a firm overall tone. The Euro was unable to regain territory on Friday and posted 7-week lows against the Dollar before a slight recovery in early Europe. Overall yield spreads will remain a key element in the short term with markets also monitoring developments surrounding the debt ceiling during the weekend.

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The US Philadelphia Fed manufacturing index recovered to -10.4 for May from -31.3 the previous month and stronger than consensus forecasts of –19.8. New orders and shipments also contracted at a slower rate for the month while unfilled orders declined more sharply. There was also a faster rate of decline in employment and the workweek. Inflation readings were mixed with a slightly faster rate of increases for prices paid while prices received edged lower at a faster rate. Companies are less optimistic over the outlook while pricing pressure are expected to be stronger. Initial jobless claims declined to 242,000 in the latest week from 264,000 previously and significantly below consensus forecasts of 254,000 while continuing claims were marginally lower at 1.80mn from 1.81mn previously. The claims data offered some reassurance over labour-market trends.

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