Markets Report - 12 September 2022

A daily breakdown of the markets for the 12th September 2022, provided to you by Sterlex.

🇪🇺💶Comments from European Central Bank (ECB) officials and the 10-year US Treasury note auction later in the day will be watched closely by market participants. The latest comments from officials revived expectations for one more 75 bps hike in October. The pair trades with strong daily gains above 1.0100. Additionally, several news outlets reported that the bank is planning to start discussing quantitative tightening in October, allowing the shared currency to continue to gather strength. EUR/USD snapped a three-week losing streak on Friday and preserved its bullish momentum early Monday.

🇬🇧💷The GBP/USD pair catches fresh bids near the 1.1600 mark on Monday and climbs to a near two-week high during the first half of the European session. Furthermore, the worsening outlook for the UK economy might further contribute to keeping a lid on any further gains for the GBP/USD pair. Separately, the UK Manufacturing and total Industrial Production fell short of expectations, arriving at 0.1% MoM in July and -0.3%, respectively. The worries were further fueled by the mostly disappointing UK macro data released earlier this Monday. Nevertheless, the GBP/USD pair has now rallied nearly 300 pips from the 1.1400 neighbourhood, or a 35-year low set last Wednesday and remains at the mercy of the USD price dynamics. The pair is currently trading around the 1.1700 round figure and is looking to build on its recent bounce from the lowest level since 1985 touched last week. This warrants caution before positioning for any further gains. The UK Office for National Statistics reported that the economy expanded by 0.2% in July, less than consensus estimates for a 0.5% growth.

🇺🇸 🏦No data releases in the US data space other than 3-month/6-month Bill Auctions and 3-year/10-year Note Auctions. Bolstering the dollar’s underlying positive stance appears the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market. This view was reinforced by Chair Powell’s speech at the Jackson Hole Symposium. On the latter, CME Group’s FedWatch Tool now sees the probability of such a rate raise at 90% from around 57% a week ago and 45% vs. a month ago. The move lower in the dollar comes in tandem with a small downtick in US yields across the curve, as market participants appear to have already priced in a 75 bps interest rate hike at the Fed’s September 21 gathering. The index loses ground for the second session in a row and extends further the corrective downside after last week’s 20-year peaks well north of the 110.00 mark.