Another morning of tentative gains in Europe has come in the wake of a welcome batch of PMI surveys that help lift sentiment around eurozone and UK growth. The surprise rebound across UK, eurozone, and German composite PMI surveys helped drive euro and sterling strength in early trade, with traders increasingly aware that a swift return to growth could allow for additional monetary tightening if necessary. Coming a day after the ONS upgraded their 2023 growth forecast, the UK economy has once again proved its robustness after the services and composite PMI surveys pushed back up into expansion for the first time since July. The ONS warning that UK inflation has become more domestically driven has been reiterated this morning, with services sector prices charged by UK private sector firms increasing at the fastest pace since July. Higher wages may lessen the deterioration in living standards seen over the course of this crisis, but the BoE will be keen to see businesses normalise wages in a bid to drive down consumer prices.
UK energy bills look set to rise 5% from January, thanks to the new price cap announced by Ofgem this morning. This sees the price of energy rise to the highest winter rate in history, with the lack of government support meaning that consumers are bearing the full brunt of the surge in gas prices in the wake of the Russia/Ukraine war. With the UK PMI survey back into expansion territory, and signs of continued inflation pressures, it is easy to see why markets still see a greater chance of an additional hike from the Bank of England (15%) compared with the ECB (1%) and Federal Reserve (11%).
US markets are closed for Thanksgiving today, with low trade volumes expected as a result. Nonetheless, this paves the way for a busy end to the week, with Black Friday bringing potential volatility for retail names. The third quarter earnings season saw a number of retailers warn of a potentially difficult fourth quarter, and traders will therefore be on the lookout for insights from payment providers and retailers over spending levels for this key weekend.
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