Markets Report - 18 September 2023

A daily breakdown of the markets for the 18th September 2023, provided to you by Sterlex.

🇪🇺💶The Euro (EUR) alternates gains with losses against the US Dollar (USD) at the beginning of the week, prompting EUR/USD to gyrate around the 1.0660 region early in the European morning. With regards to monetary policy, investors continue to assess last week’s dovish hike by the European Central Bank (ECB) and persist in anticipating the possibility of interest rate reductions by the Federal Reserve (Fed) occurring sometime in the second quarter of 2024. The period under study saw the pair climb to the 1.0750 region and quickly lose ground soon afterwards ahead of the ECB event. On another front, EUR net longs extended the downtrend and reached levels last seen in mid-November 2022, according to the latest positioning report by the CFTC for the week ended on September 12.

🇬🇧💷Ahead of the BoE's policy decisions on Thursday, the UK Office for National Statistics will publish Consumer Price Index (CPI) data on Wednesday.GBP/USD registered a daily close below 1.2400 for the first time since late May on Friday. In fact, BoE Governor Andrew Bailey had told lawmakers that the central bank is now "much nearer" to ending its run of interest rate increases. Ahead of the BoE's policy decisions on Thursday, the UK Office for National Statistics will publish Consumer Price Index (CPI) data on Wednesday. GBP/USD registered a daily close below 1.2400 for the first time since late May on Friday. This, along with reviving recession fears and signs that the UK labour market is cooling, might put pressure on the BoE to pause its rate-hiking cycle. The pair clings to small recover gains near that level early Monday. In the meantime, diminishing odds for a more aggressive policy tightening by the Bank of England (BoE) might hold back traders from placing aggressive bullish bets around the British Pound (GBP). The pair clings to small recover gains near that level early Monday.

🇺🇸 🏦The greenback, in terms of the USD Index (DXY), adds to Friday’s decline and revisits the low-105.00s ahead of the opening bell in the old continent on Monday. The corrective decline in the dollar comes in line with some fresh downside pressure in US yields across different maturities, while investors broadly anticipate interest rates to remain unchanged at the Fed's gathering later in the week. In the US data space, the NAHB Housing Price Index for the month of September will be in the limelight along with July’s Long-Term TIC Flows.

Key events in the US this week: NAHB Housing Market Index, Net Long-Term TIC Flows (Monday) – Building Permits, Housing Starts (Tuesday) – MBA Mortgage Applications, Fed interest rate decision, Fed Press Conference (Wednesday) - Initial Jobless Claims, Philly Fed Index, CB Leading Index, Existing Home Sales (Thursday) – Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.