Markets Report - 10 July 2023

A daily breakdown of the markets for the 10th July 2023, provided to you by Sterlex.

🇪🇺💶The EUR is proving resilient in the near term to the disappointing economic data flow from the Eurozone with EUR/USD continuing to trade towards the top of this year’s range between 1.0500 and 1.1000. The price action is giving us more confidence that the next move higher for the pair will be to the upside. Considering all factors, the report likely favours a 25 basis points increase in July. Commenting on the survey's findings, "there is also nothing positive to report in terms of forward-looking expectations," said Sentix managing director Manfred Huebner. The Eurozone Sentix Investor Confidence declined to -22.5 in July from -17 in June. On the other hand, those optimistic about the resilient economy would highlight the strong hiring indicated by the household survey, a decrease in the unemployment rate, and notable growth in wages. Individuals focused on growth would emphasize the lowest monthly job gain in 30 months (209K) and the downward adjustment of 110K for the previous two months. Huebner further noted that the Investor Confidence Index for Germany fell 7.3 points to -28.4.

🇬🇧💷Inflation in the United Kingdom is not showing signs of deceleration despite that BoE and UK diplomats have extended the scope of an inflation-control toolkit to coercion. The Unemployment Rate is seen unchanged at 3.8% and Three-month Average Earnings Index is expected to increase to 6.8% against the former release of 6.5%. Therefore, the speech from Andrew Bailey will be keenly watched to get cues about inflation and interest rate guidance. An economic indicator that could create more troubles for BoE policymakers is the labor cost data, which is expected to increase further and make the inflation situation more worsen. As per the preliminary estimates, Claimant Count Change is expected to show an increase of 20.5K in June vs a decline of 13.6K reported last month.

🇺🇸 🏦The greenback, in terms of the USD Index (DXY), regains some composure following Friday’s post-NFP sharp sell-off and revisits the 102.40 zone at the beginning of the week. The index picks up some buying interest following two consecutive daily pullbacks on Monday as investors continue to adjust to Friday’s release of the June Payrolls (+209K jobs), while expectations for a 25 bps rate hike remain largely unchanged for the time being. On the latter, CME Group’s FedWatch Tool sees the probability of such a scenario at around 92% against the backdrop of the ongoing resilience of the US economy and the still tight labour market. On the speculative front, net longs in the USD receded to 3-week lows in the week ended on July 3, a period where the index entered some consolidative range prior to the release of the crucial jobs report.