Markets Report - 17 October 2022

A daily breakdown of the markets for the 17th October 2022, provided to you by Sterlex.

🇪🇺💶EUR/USD advances with decent gains on Monday on the back of the resumption of the selling pressure around the greenback and the broad-based upbeat mood in the risk-associated universe. In addition, ECB’s P.Lane is due to speak later, while the Monthly Budget Statement and the MY Empire State Manufacturing Index will take centre stage across the ocean. In the domestic calendar, final inflation figures in Italy saw consumer prices rise 0.3% MoM in September and 8.9% from a year earlier. Some extra support for the euro also comes after rumours said that ECB Board member P.Lane will advocate for a 75 bps rate hike at the next event at the end of the month. Still around the ECB, Vice-President De Guindos did not rule out a technical recession in the euro area, although he later soothed his comments by saying that any recession will not be excessively intense.

🇬🇧💷GBP/USD is looking to stabilize around 1.1300, having hit daily highs at 1.1331 pre-Hunt’s statement - The spot is up 1.12% on the day. New Chancellor Jeremy Hunt will give a statement on fiscal policy today. UK’s new Chancellor of the Exchequer Jeremy Hunt is making an emergency statement this Monday on the mini-budget, aimed to stabilize financial markets. Essentially, traders remained on tenterhooks with the UK chancellor to make a statement on a medium-term fiscal plan on Monday afternoon while Tory backbenchers plot to topple the UK PM Liz Truss’ government over the weekend. The aim is to deliver a clear message that stabilises the gilt market and hopefully restores confidence. A group of senior Tory supporters of Rishi Sunak is planning to meet on Monday night for a dinner hosted by ex-Treasury minister Mel Stride, amid speculation that as many as 100 no-confidence letters have been submitted to Sir Graham Brady, chairman of the backbench 1922 Committee, per The Guardian. The Bank of England (BOE) published a market notice on Monday, setting out how energy firms and their commercial lenders can apply to participate in the energy markets financing scheme (EMFS).

🇺🇸 🏦The index comes under some moderate downside pressure and probes the sub-113.00 zone at the beginning of the week in a context favourable to the risk complex, while declining yields also accompany the downtick in the buck. Indeed, investors’ bias towards the riskier assets puts the dollar to the test and triggers the corrective move in the index against an unchanged macro scenario, where expectations of a 75 bps rate hike from the Fed at the November 2 meeting remain well anchored. The greenback, in terms of the USD Index (DXY), gives away part of the optimism seen at the end of last week and slips back below the 113.00 neighbourhood on Monday. On the latter, CME Group’s FedWatch Tool sees the probability of a ¾ point raise at almost 97%.