Markets Report - 05 September 2023

A daily breakdown of the markets for the 5th September 2023, provided to you by Sterlex.

🇪🇺💶The Euro (EUR) loses further ground vs the US Dollar (USD) and drags EUR/USD to print new multi-week lows near the 1.0750 level on turnaround Tuesday. The resurgence of selling pressure around the pair appears underpinned by lower prints from the Services sector in China, as per PMI results published by Caixin earlier in the Asian trading hours. The European Central Bank’s (ECB) monthly survey of consumer expectations for inflation showed on Tuesday, inflation expectations among Eurozone consumers remained unchanged in July. Market discussions revolve around the concept of stagflation, further contributing to the prevailing sense of ambiguity. The ECB finds itself navigating a climate of heightened uncertainty surrounding the potential course of interest rates beyond the summer months.

🇬🇧💷GBP/USD justifies the Cable traders’ indecision amid mixed catalysts while making rounds to 1.2630 heading into Tuesday’s London open. Apart from the unclear signals, the cautious mood ahead of the key US and UK data also prods the Pound Sterling moves of late. Earlier in the day, Reuters came out with the Barclay Card data while saying, “Annual growth in the UK consumer spending on credit and debit cards slowed to 2.8% in August from 4.0% in July.” However, the UK’s BRC Like-for-Like Retail Sales grew 4.3% YoY for August versus 1.8% prior. While the British spending details are mixed, a suggestion from the UK Think Tank to infuse more liquidity into the UK capital markets with pensions seems to lure the Bank of England (BoE) hawks, due to the likely lift to the inflation, which in turn lures the Pound Sterling bulls.

🇺🇸 🏦The USD Index (DXY), which tracks the greenback vs. During that period, the index climbed to fresh multi-week tops near 104.50 on the back of further evidence of the resilience surrounding the US economy. In addition, from the speculative community, net longs in USD dropped to three-week lows during the week ended on August 29 according to CFTC. As US markets return to the normal activity following Monday’s Labor Day holiday, investors continue to assess the increasing likelihood that the Federal Reserve might start cutting rates around Q2 2024. This view seems to be behind the drop in US yields across different maturities sparked in the latter part of August. a bundle of its main rival currencies, manages to pick up some pace and reclaim the 104.30 region on Tuesday. The index leaves behind Monday’s small pullback and flirts with the 104.30 region on turnaround Tuesday amidst a mild improvement in the risk-off sentiment.