FX Daily – Biding time to get more clarity

EUR is below 1.10, GBP pivots 1.26.
Group Research, Philip Wee09 May 2023
    Photo credit: Unsplash Photo

    DXY backed off testing its 101 support and appreciated 0.2% to 101.4. The US Treasury 2Y yield rose 8.7 bps to 4%, wary of surprises in tomorrow’s US CPI data. Consensus expects headline inflation to rise to 0.4% MoM in April from 0.1% in March and core inflation to ease modestly to 0.3% from 0.4%. Today, US President Joe Biden will meet the four Senate and House leaders to break the impasse over lifting the debt ceiling. Although no one expects any deal, markets will look for progress to end the brinksmanship and avert a default on US debt. US Treasury Secretary Janet Yellen estimated that the government would run out of funds to pay its bills on 1 June. S&P 500 was flat, while Nasdaq Composite rose modestly by 0.2%. The SPDR S&P Regional Bank ETF resumed its fall after Friday’s rebound by 2% to 37.6. 

    EUR/USD is below 1.10 this morning after depreciating 0.1% on Monday. Eurozone Sentix Investor confidence fell to -13.1 in May, worse than the -7.5 consensus and -8.7 in April. Expectations fell to -19 from -13, while current situation dipped to -7 from -4.3. EUR must close below 1.0950 to extend its downside to 1.0860 or its 50-day moving average. GBP/USD hit a 13-month high before depreciating 0.1% to 1.2618 after three days of gains. On 11 May, consensus expects the Bank of England to hike by 25 bps to 4.50%. On Friday, preliminary real GDP growth in 1Q23 is expected to be flat at the same 0.1% QoQ sa pace as the previous quarter. However, gross fixed capital formation will contract by 0.1% after expanding by 0.3%. Private consumption growth will slow to 0.1% from 0.2%. GBP will probably pivot around 1.26 before getting more clarity on the direction of UK rates and the economy.

    Quote of the day
    “Just be patient. Let the game come to you. Don’t rush. Be quick, but don’t hurry.”
         Earl Monroe, American former professional basketball player

    9 May in history
    The American Civil War ended in 1865.


    Philip Wee

    Senior FX Strategist - G3 & Asia


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