Markets Report - 28 November 2022

A daily breakdown of the markets for the 28th November 2022, provided to you by Sterlex.

🇪🇺💶Still around the money market, the German 10-year bund yields slip back below the key 2.0% mark, in line with their American peers. EUR/USD resumes the upside and leaves behind Friday’s retracement on the back of the so far pronounced pullback in the dollar, which is also accompanied by declining US yields across the curve. In addition, markets repricing of a potential pivot in the Fed’s policy remains the exclusive driver of the pair’s price action for the time being. Earlier on Monday, ECB Board member Knot reiterated that underlying inflation trends are worrisome, at the time when he hinted at the likelihood of potential negative economic growth in the last quarter. In the meantime, the European currency is expected to closely follow dollar dynamics, the impact of the energy crisis on the region and the Fed-ECB divergence. Moving forward, Chair Lagare is due to speak before the European Parliament later on Monday.

🇬🇧💷Economists at Danske Bank expect negative GDP growth for four consecutive quarters and growth not to return until the fourth quarter of 2023. The GBP/USD pair attracts some dip-buying near the 1.2025 region on Monday and climbs to a fresh daily peak during the early part of the European session. That said, a bleak outlook for the UK economy could act as a headwind for the Sterling and cap the upside for the major, at least for now. The UK economy has entered a recession. This provides an additional lift to the GBP/USD pair and remains supportive. The pair is currently placed around the 1.2100 mark and remains well within the striking distance of its highest level since August 12 touched last week. Inflation pressures will remain elevated during 2023, forcing the Bank of England to deliver further hikes. The British Pound, continues to draw support from firming expectations that the Bank of England will continue to raise borrowing costs to combat stubbornly high inflation.

🇺🇸 🏦The US economy continues to face rapid inflation stemming from aggregate demand remaining too high. Indeed, the greenback sheds ground vs. Moving forward, the week will be marked by the speech by Chief Powell on “Economic Outlook, Inflation and the Labour Market” (Wednesday) and the relese of November’s Payrolls (Friday). the risk-complex, while a sharp decline vs. the Japanese yen follows the negative start of the week in US yields so far. The Fed will continue to tighten financial conditions and push the US economy towards a recession starting in Q2 2023. In the calendar, the only scheduled release will be the Dallas Fed Manufacturing Index, seconded by short-term bill auctions and a speech by New York Fed J.Williams (permanent voter, centrist). The index resumes the downside below the 106.00 mark in the wake of the opening bell in the European markets on Monday.