Markets Report - 15 May 2023

A daily breakdown of the markets for the 15th May 2023, provided to you by Sterlex.

🇪🇺💶EUR/USD regains some upside traction and sets aside part of last week’s deep sell-off to the mid-1.0800s, an area last seen back in mid-April, on the back of some corrective decline in the greenback. Monday’s uptick in spot, in the meantime remains underpinned by the continuation of the recovery in the German 10-year Bond yields, which add to Friday’s gains near the 2.30% area. Eurozone’s Industrial Output declined 4.1% MoM, the Eurostats said in its latest publication, vs -2.5% expected and +1.5% previous reading. Eurozone Industrial Production snaps its run increases in March, the official data showed on Monday, suggesting that the manufacturing sector recovery has faltered yet again. On an annualized basis, the bloc’s Industrial Production arrived at -1.4% in March versus a 2.0% figure registered in March and against the expected growth of 0.9%. Indeed, traders appear to be cashing out part of the recent dollar’s gains on Monday, while the appetite for the risk complex seems to lend much needed oxygen to the pair at the beginning of the week.

🇬🇧💷Bank of England Governor Andrew Bailey pushed interest rates by 25 basis points (bps) to 4.5%. Three-month Unemployment Rate is seen unchanged at 3.8%. The current UK inflation situation might result in the missing of UK Prime Minister Rishi Sunak’s pledge of halving UK inflation by the end of CY2023. Going forward, UK’s Employment data (April) will be keenly watched. This could fuel inflationary pressures further. After hiking interest rates for the 12th consecutive time, Bank of England policymakers agreed that they underestimated the strength and persistence of the United Kingdom’s inflation. Regarding inflation guidance, Bank of England policymakers believe that UK’s inflation will come down to 2% by early 2025. Average Earnings excluding bonuses are expected to accelerate to 6.8% from the former release of 6.6%. The Pound Sterling is likely to remain active ahead of the United Kingdom’s Employment data, which is scheduled for Tuesday. Claimant Count Change is seen declining by 10.8K. Shortage of labor in the UK market has been a major reason behind its tight labor market conditions.

🇺🇸 🏦US Dollar Index (DXY) stays on the front foot at the highest level in over a month, close to 102.75 amid a three-day uptrend during Monday’s Asian session. It is worth noting that US President Joe Biden’s hint of US debt ceiling talks on Tuesday and a Treasury Official’s optimism seems to prod the DXY bulls of late, especially amid a light calendar and early Asian hours. Alternatively, downbeat US data and the Fed’s latest dovish hike prod the DXY optimists. However, the fact that the policymakers are at loggerheads and the Federal Reserve (Fed) officials remain hawkish seems to defend the US Dollar Index bulls. The reason could be linked to the looming concerns that the US may default in early June if the debt ceiling isn’t altered soon. On the same line were fears emanating from the US banks as some of the mid-tier ones posted heavy drawdowns in share prices and deposits in the last week. The greenback’s gauge versus the six major currencies marked the first weekly gain in three while also posting the biggest run-up since late 2022 despite the downbeat US inflation signals.