June 27, 2023

Daily Report 27/06/2023

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Sterling was unable to gain any significant traction after Monday’s European open with markets still fretting over weaker risk conditions as the UK FTSE 100 index dipped to a 3-month low. There were also reservations over the UK outlook. The latest UK CBI retail sales survey recorded a headline decline of –9 for June from –10 previously and weaker than consensus forecasts of –6. Companies expect that sales will be unchanged for July as underlying confidence remains fragile. US 2-year yields edged lower in early trading, but edged higher to near 5.15% later in the day and close to 15-year highs. BRC data recorded a slowdown in shop-price inflation to 8.4% from 9.0% previously which will provide an element of relief.

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The German IFO business confidence index dipped to 88.5 for June from a revised 91.5 previously which was below consensus forecasts of 90.7 and the lowest reading of 2023. There was a smaller decline in the current conditions index together with a more substantial decline in the expectations index. According to the IFO, there is weak demand in industry with order books falling. Company expectations remain weak while global rate hikes are dampening demand. The maintained underlying reservations surrounding the German economy with the Euro tending to drift lower, although the reaction was muted given the weak PMI data released on Friday with markets already pessimistic over the outlook. According to the German Bundesbank, the Germany economy has bottomed out with slight GDP growth expected for the second quarter. The bank added that wages are rising strongly which will support disposable incomes. The bank also expects that inflation will slow further in the coming months, although overall price pressures are likely to remain very high. The upward pressure on wages will also maintain upward pressure on prices.

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9.00 Christine Lagarde Speech

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The Dallas Fed manufacturing index secured a slight recovery to –23.2 for June from –29.1 previously. There was a net easing of pricing pressures for the month. New York Fed President Williams stated that restoring price stability is on paramount importance, but there were no specific comments on monetary policy.

Key Data 

13.30 Nondefence Capital Goods Orders ex Aircraft (May) Exp. 0% Prev. 1.3%
13.30 Durable Goods Orders (May) Exp. -1% Prev. 1.1%