June 30, 2023

Daily Report 30/06/2023

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UK data recorded an increase in mortgage approvals to 50,500 in May from a revised 49,000 the previous month and slightly above consensus forecasts. There was, however, a second successive decline in mortgage lending for the month with a small net increase in personal lending. The data also recorded a sharp decline in bank deposits for the month. The data triggered some concerns over a squeeze on the consumer sector and a risk that there will be deterioration in the economy, although the market impact was limited with the 2-year yield holding above the 5.20% level which underpinned capital inflows.

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German consumer prices increased 0.3% for June with the year-on-year rate increasing to 6.4% from 6.1% and slightly above expectations of 6.3%. Later in the day, Germany’s Destatis will release inflation data for June. On a yearly basis, CPI is forecast to rise 6.7%. The monthly Harmonized Index of Consumer Prices (HICP), the ECB’s preferred gauge of inflation, is expected to increase 0.3% on month following the 0.2% decrease recorded in May.

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In comments on Thursday, Fed Chair Powell stated that the process of getting inflation to the 2% target has a long way to go. He added that the labour market is very tight while it will take time for the rest of the economy to feel the full impact of rate hikes to date. The comments from Powell continued to suggest that the central bank will be looking to hike rates in July unless there is a compelling reason not to. Markets have, however, priced in a rate increase for July and the dollar failed to gain any further traction on the comments.

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