EM market report Wall Street traffic lights

Recession fears cause Wall Street slump

Matthew Rush 01 July 2022

GBP: Quiet economic calendar from the UK

EUR: Europe releases YoY CPI figures today

USD: ISM figures this PM ahead of Independence Day

Sterling

Sterling finished the month with minimal shocks to the market as final GDP (QoQ) came in as expected, however the pound’s fluctuations derived from wider market sentiment moving as a by-product. Talks of a possible VAT cut emerged overnight to help individuals deal with the current cost of living crisis, however, this remains doubtful as questions were raised about the affordability.

We expect minimal volatility from today’s final PMI figure, nevertheless, key external data and Monday’s US bank holiday may mean sterling’s direction will be dictated by others.

Euro

German unemployment figures surprised most as the forecast was widely missed from 5k new jobs to 133k becoming jobless. This figure in itself didn’t cause the EUR to fall, but doubts over the possibility of a 50bps rate hike from the ECB diminished, meaning the euro weakened across the board. The single currency did recover as quarterly options expired and the single currency clawed back any losses. Today’s inflation figure will be today's key talking point from Europe.

USD

Dollar moves were limited as core PCE was the only key data of note, however Wall Street published its sharpest first-half decline since 1970 as the consensus moves from inflation to recession.

Today we have ISM manufacturing figures this PM and given its Independence Day on Monday, we could see positioning ahead of the bank holiday.

Market rates

Today's Interbank Rates at 09:45am against sterling movement vs yesterday.

Euro

€1.158

US dollar

$1.211 ↓

Australian dollar

$1.778 ↑

South African rand

R19.77 ↑

Japanese yen

¥164.1 ↓

Have a great day.