Tuesday's Markets Update (July 11, 2023)

12 Jul 2023 by rate3

On Tuesday, the NASDAQ (o:13709, c:13760) added a bit, closing the day in a green. Traders were processing comments from Fed officials which continued to stress the need of further tightening this year. At the same time BTC (o:30433, c:30581) continued to edge up, preparing to storm 31K, again.

Details
The NFIB Small Business Optimism Index rose to a seven-month high of 91 in June 2023, beating market expectations. Inflation was the top concern for 24% of owners, down 1 point from last month. Net 29% reported higher selling prices, the least since March 2021. The percentage of owners who expect real sales to be higher improved by 7 points to -14%. Fewer firms expect worst business conditions over the next six months (+10 points to -40%). Fewer reported job openings were hard to fill (-2 points to 42%). The index remained below its 49-year average of 98 for the past 18 months.

Currencies
Pound: The pound rose above $1.29 on Tuesday, its highest level since April, as hotter-than-expected wage growth put pressure on the BoE to keep raising rates. Excluding bonuses, UK wages rose 7.3% in the three months to May, the biggest increase outside the pandemic and above forecasts. BoE Governor Andrew Bailey said policymakers needed to "see the job through" on inflation, suggesting the central bank will maintain its tightening campaign.

Euro: The euro hits 17-month high and consolidated its gains above $1.10 on Tuesday, reaching its highest level since May 4 as investors expect ECB tightening policy to continue. Inflation in the Eurozone has decreased to a 17-month low of 5.5% in June, but the core rate remained significantly above the ECB's target of 2%. However, traders anticipate rates peaking at just below 4% by year-end. The ECB is expected to raise interest rates by 25 basis points in July and September, and by a larger increment in October.