Markets Report - 24 April 2023

A daily breakdown of the markets for the 24th April 2023, provided to you by Sterlex.

🇪🇺💶European Central Bank (ECB) Governing Council member and Bank of France head Francois Villeroy de Galhau said on Monday, “central banks’ core mandate worldwide is price stability and climate change already affects the level of prices and activity.” The ECB is set to announce its policy decision next week and markets are expecting the central bank to raise rates by a quarter point, with the possibility of a 50 bps hike. Eurozone inflation and growth data are due this week. The headline German IFO Business Climate Index edged higher to 93.6 in April from 93.2 in March - This reading came in slightly weaker than the market expectation of 94. before we can arrive at the point where we can pause.”. The Euro is underpinned by comments from Belgian central bank president Pierre Wunsch, who said “We are waiting for wage growth and core inflation to go down.

🇬🇧💷The GBP/USD pair struggles to capitalize on Friday's goodish rebound of over 65 pips from the 1.2365 area and kicks off the new week on a subdued note. Spot prices seesaw between tepid gains/minor losses through the early European session and currently trade around the 1.2435 region, nearly unchanged for the day. The bets were lifted by last week's release of stronger UK wage growth data and the stubbornly high inflation figures. The downside for the GBP/USD pair, however, remains cushioned, at least for the time being, amid rising bets for an additional interest rate hike by the Bank of England (BoE) in May. In fact, the markets now see over a 90% chance of a 25-bps rate hike in May. The market sentiment remains fragile amid worries about economic headwinds stemming from rising borrowing costs. On the Pound Sterling front, further contraction in United Kingdom Retail Sales data failed to impact the odds of one more rate hike from the Bank of England (BoE). UK inflation is extremely stubborn and the BoE may not pause its policy-tightening spell. This is evident from a fresh leg down in the equity markets and drives some haven flows towards the buck.

🇺🇸 🏦The greenback, when tracked by the USD Index (DXY), gathers some upside impulse and approaches the key 102.00 region on Monday. In favour of a pivot in the Fed’s hiking cycle following the May event appears the persevering disinflation and nascent weakness in some key fundamentals. The absence of strong catalysts leaves the price action around the dollar – and the rest of the FX space – somewhat muted near the 102.00 region so far at the beginning of the week. Later in the NA session, the Chicago Fed National Activity Index will be in the limelight seconded by the Dallas Fed Manufacturing Index. In the meantime, the index seems to have moved into a consolidative phase against steady expectations of another rate increase in May by the Fed, while alternating risk appetite trends also collaborate with the vacillating price action in the buck. In the meantime, investors continue to anticipate a 25 bps rate hike at the Fed’s meeting on May 3, while the likelihood of a pause in the tightening cycle following this meeting seems to be gaining momentum as well. The index maintains the side-lined trade well in place for yet another session on Monday, this time amidst so far declining US yields and a mild knee-jerk in the risk complex.