EM Market Report

We can work it out

Thanim Islam
Thanim Islam 16 May 2023

- UK job market starting to turn?

- All eyes on debt ceiling talks today

- Eurozone GDP in focus


GBP finished largely higher yesterday across the G-10 retracing 50% of the losses suffered post the BoE meeting last week. However this morning we’re seeing GBP starting the day lower after job numbers disappointed. The unemployment rate ticked up to 3.9% from 3.8%, wage numbers eased to 5.8% and payroll numbers showed -136,000 versus an expected 25,000. Markets have eased additional rate hike expectations across this year by about 5bps but it's worth noting ahead of the next BoE meeting we have one more set of job numbers out as well as two sets of inflation numbers. So whilst the argument towards the BoE pausing additional hikes next month may be building, it may be a bit premature to draw a firm conclusion from today's numbers.

Despite comments from Fed Bostic pushing back against rate cuts this year as well as Kashkari stating that the Fed has more to do in its fight against inflation, there was minimal impact on money markets' pricing on interest rates and USD declined marginally across the G-10. Equities largely finished higher which likely weighed on demand for USD.


Market rates

* Daily move - against G10 rates at 5:00pm, 15.05.23

** Indicative rates - interbank rates at 5:00pm, 15.05.23

Table 16-5

Data points



  • None today

Our thoughts

The EUR will be in focus today with the latest ZEW survey and GDP figures for the first quarter of this year. The EU Commission raised their forecasts for growth this year from the eurozone, so it will be interesting to see if today's numbers come in better than expected. Higher growth will likely lead to markets seeing the ECB staying on their rate hike path and should see EURUSD bounce off it's uptrend support (see below).

Talks will resume today over the US debt ceiling and continued doubts of a default could see safe-haven flows into USD and JPY. Also, today sees the April retail sales report which will give a measure of the confidence of US consumers.

Further easing of inflation in Canada could lead to rate cuts being priced in this year and lend to weakness on CAD. GBPCAD has been trading in a very tight range over the last 6 days and a lower print on inflation could break us out.

Chart of the day

Since the ECB meeting on the 4th May, the EUR has slid by 2.4% against the US dollar taking us from a prior resistance level to now testing the September uptrend support line. Higher GDP numbers from the EU could see this uptrend intact but a lot of the recent moves lower on the pair also has been down to concerns over the US debt ceiling which has caused increased demand for the safety of USD. Should there be no progress on debt ceiling talks then that could be enough to break this uptrend.

mrtable16-5Source: Bloomberg Finance L.P.

Have a great day.