Markets Report - 18 July 2023

A daily breakdown of the markets for the 18th July 2023, provided to you by Sterlex.

🇪🇺💶The Euro (EUR) alternates gains with losses around the 1.1240 zone vs the US Dollar (USD) in the wake of the opening bell in the old continent at the beginning of the week. However, there is still much discussion about the potential future actions of these central banks as they work to normalize their monetary policies, particularly with growing concerns about a possible economic slowdown on both sides of the Atlantic. At present, the market has already largely priced in the expected 25 bps rate hike by both the ECB and the Fed. Several European Central Bank (ECB) policymakers, including President Christine Lagarde, will be delivering speeches during the European trading hours.

🇬🇧💷The GBP/USD pair has sensed some support as investors are hoping that core inflation will remain elevated and the Bank of England (BoE) would be forced to continue its aggressive policy-tightening spell so that inflation could return to desired levels. The Pound Sterling (GBP) has found some buying interest after a corrective move to near 1.3070 as investors are shifting their focus toward the United Kingdom Consumer Price Index (CPI) data, which will be released on Wednesday at 06:00 GMT. UK’s corporate is worried and believes that "the burst of business optimism seen in the spring has faded under the weight of inflation and rising interest rates”. After big-ticket items, the burden of inflationary pressures is extended to the housing sector. Although United Kingdom’s central bank would be left with no other option than to raise interest rates further, the burden of higher borrowing costs and red-hot inflation will be faced by households.

🇺🇸 🏦US Dollar Index (DXY) remains sidelined near 99.90-95 as it struggles to defend the previous day’s corrective bounce off the lowest levels since April 2022 amid Monday’s sluggish Asian session. On Friday, the preliminary reading of the University of Michigan's (UoM) Consumer Confidence Index rose to 72.6 from 64.4 in June, versus the market’s expectations of 65.5. In doing so, the US Dollar’s gauge versus the six major currencies takes a breather after posting the biggest weekly loss since November 2022. Further details suggested that the one-year and 5-year consumer inflation expectations per the UoM survey edged higher to 3.4% and 3.1% in that order versus 3.3% and 3% respective priors. Before that, the US Consumer Price Index (CPI) and Producer Price Index (PPI) for June dropped to 3.0% and 0.1% on a yearly basis from 4.0% and 0.9% YoY in that order, which in turn drowned the US Dollar and propelled the EUR/USD pair toward the highest level since February 2022.