Markets Report - 23 October 2023

A daily breakdown of the markets for the 23rd October 2023, provided to you by Sterlex.

🇪🇺💶In the euro docket, the European Commission (EC) will publish its advanced gauge of the Consumer Confidence for the euro area for October. Apart from this, the European Union is considering extending an emergency gas price cap imposed in February, amid concerns that the Middle East crisis and sabotage of a Baltic pipeline could push prices up again this winter. Additionally, geopolitical tensions in the Middle East continue to hang over the market. This comes despite inflation levels surpassing the bank's target and growing concerns about the risk of a slowdown or stagflation in the Eurozone's economy. The fear of the Eurozone energy crisis could exert some selling pressure on the Euro and act as a headwind for the EUR/USD pair. The Euro (EUR) is showing a slight strength against the US Dollar (USD), causing EUR/USD to keep the trade around the 1.0600 region at the beginning of the week. Investors are contemplating the possibility of the European Central Bank (ECB) discontinuing certain policy measures. Any sign of escalating tensions could see weigh on the riskier currency like the Euro.

🇬🇧💷The GBP/USD pair outlook remains vulnerable as economists expect employment levels to decrease again in the three months to August, in a sign that firms are cutting back on their workforces due to a dismal demand outlook. The Pound Sterling (GBP) struggles to find a direction as investors await for UK Employment data, which will be published on Tuesday. In this context, investors see the BoE keeping interest rates unchanged for the second straight time in November.

Higher interest rates by the Bank of England (BoE) and stubborn price pressures have squeezed households’ real income significantly, weighing on demand. Deepening Israel-Palestine tensions add to uncertainty and have the potential to cause higher energy prices, adding to inflation pressures.

🇺🇸 🏦The greenback, in terms of the USD Index (DXY), manages to regain balance and revisits the106.30 zone at the beginning of the week. In the meantime, market participants continue to look at the geopolitical front in the Middle East for some near-term direction. The index maintains the side-lined theme for yet another session on Monday, always in the low-106.00s and amidst alternating risk appetite trends for the time being. When it comes to the monetary policy expectations, investors see the Federal Reserve keeping its interest rates unchanged at the upcoming November 1 meeting, while the door for a potential rate hike in December remains open. In the US data space, the Chicago Fed National Activity Index will be the sole data release later in the session.