Markets Report - 02 May 2023

A daily breakdown of the markets for the 2nd May 2023, provided to you by Sterlex.

🇪🇺💶The Harmonized Index of Consumer Prices (HICP) and the Core HICP in the Eurozone are forecast to remain unchanged at 6.9% and 5.7% on a yearly basis in April, respectively. Traders might also prefer to wait on the sidelines heading into the key central bank event risk - the highly-anticipated ECB monetary policy meeting on Thursday. The European Central Bank's (ECB) Bank Lending Survey will also be scrutinized by market participants to see the impact of the banking crisis on financial conditions in the Euro area. Following Monday's decline, EUR/USD clings to modest recovery gains near 1.1000 in the European morning. The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the EUR/GBP cross has formed a near-term bottom and positioning for any further appreciating move.

🇬🇧💷GBP gains underpinning support from an unexpected MoM rise in UK house prices by 0.5% in April versus the negative figure expected, according to data from the UK’s biggest mortgage lender, Nationwide. Food prices at British supermarkets rose 15.7% in the year to April, the biggest annual increase in records going back to 2005, but lower prices are on the horizon, the British Retail Consortium (BRC) said on Tuesday per Reuters. GBP/USD licks its wounds around 1.2500 after posting the biggest daily loss in a week, as well as snapping a three-day uptrend the previous day. However, comparatively more hawkish concerns surrounding the Fed, than the Bank of England (BoE), keep the Cable pair sellers hopeful as it lacks upside momentum near the highest levels in 11 months marked the previous day. In doing so, the Cable pair takes clues from the US Dollar’s retreat while cheering mostly upbeat inflation signals from the UK.

🇺🇸 🏦The greenback, in terms of the USD Index (DXY), gives away part of the recent recovery and puts the 102.00 region to the test on Tuesday. The index now shows some weakness and leaves behind three consecutive daily advances amidst the moderated rebound in the risk-associated universe and declining US yields on Tuesday. On the latter, yields retreat across the curve and set aside a promising start of the week amidst the start of the 2-day FOMC event later in the day. On this, the Federal Reserve is broadly expected to hike rates by 25 bps on Wednesday, while investors’ attention is expected to closely follow any hints of the potential moves from the Fed regarding rates in the future, particularly amidst the (increasing) likelihood of a probable pause in its hiking cycle.