Markets Report - 30 August 2023

A daily breakdown of the markets for the 30th August 2023, provided to you by Sterlex.

🇪🇺💶Data-wise in the region, flash inflation figures in Spain see the CPI rising 2.6% in the year to August, while Consumer Confidence in Italy receded a tad to 106.5 for the current month. There is no news around the European Central Bank (ECB) regarding its potential decision on rates once the summer season is over. Later in the session, the final Consumer Confidence in the broader euro area is due along with advanced inflation figures in Germany. The Euro (EUR) is now losing some upside momentum vs the US Dollar (USD), forcing EUR/USD to retreat to the 1.0860 region after Tuesday’s multi-day peaks, just pips away from 1.0900 the figure.

🇬🇧💷In the battle against persistent inflation, the UK’s factory activities and its property sector have been major victims. The Pound Sterling (GBP) is holding its ground on Wednesday as a higher risk appetite among market participants continues to improve the appeal for risk-sensitive assets. British firms continue to operate at lower capacity due to a poor demand outlook, and higher mortgage rates have forced homebuyers to postpone their purchases. The GBP/USD pair remains well-supported as investors hope that the policy divergence between the Federal Reserve (Fed) and the Bank of England (BoE) will vanish this year. More interest rate hikes from the BoE are in the pipeline as the core Consumer Price Index (CPI) data remains sticky near its all-time peak. The BoE’s Broadbent warned that inflation will not fade as quickly as it emerged despite soft energy and fuel prices.

🇺🇸 🏦The index gathers some traction and so far leaves behind two consecutive sessions of losses amidst some loss of momentum in the appetite for risk-linked assets on Wednesday. The greenback manages to regain the smile and advances to the 103.70 region when tracked by the USD Index (DXY) on Wednesday. On the latter, the usual weekly Mortgage Applications by MBA are due in the first turn ahead of the ADP report for the month of August, another estimate of the GDP Growth Rate for the April-June period, advanced Goods Trade Balance and July Pending Home Sales. The index picks up pace and regains the smile following the renewed pessimism in the first half of the week, which saw the dollar retreat from multi-week tops near 104.50 (August 25) to the vicinity of 103.60 on August 29. Indeed, Tuesday’s data-driven sell-off in the dollar now appears mitigated and investors seem to be repositioning on the greenback against the backdrop of a tepid bounce in US yields across different timeframes and ahead of key data releases in the US calendar.