Dollar ticks higher as rate expectations rise, Israeli political unrest intensifies, Pound gains following stronger-than expected CPI print.
February 21, 2023
GBP/USD 1.2095 GBP/EUR 1.1340 EUR/USD 1.0667 USD/CAD 1.3455 EUR/CHF 0.9859 EUR/SEK 11.0040 EUR/NOK 10.9541 EUR/DKK 7.4467 USD/ILS 3.6106 AUD/USD 0.6892 NZD/USD 0.6241 USD/SGD 1.3376 USD/JPY 134.59 USD/CNH 6.8818 USD/INR 82.7988 EUR/ILS 3.8513 GBP/ILS 4.3670 USD/ZAR 18.1941
The final set of figures out before next month's budget show that the UKs public sector unexpectedly posted a surplus in January as tax revenues offset the costs of the governments energy support schemes.
A major UK trial of the four-day working week found that the vast majority of businesses saw revenue gains, less burnout and better staff retention over the 6 months trial period.
GBPUSD jumped higher following strong PMI data from the UK. The UK Services PMI rose to 53.2, surpassing forecasts of 49.2. Meanwhile the manufacturing PMIs rose to 49.2, also surpassing the forecast of 47.5.EUR
PMI surveys from Europe’s two largest economies show private-sector growth return, as energy prices continue to fall, easing supply pressures. German composite PMI climbed to 51.1, the first time since June the gauge printed above the 50 threshold, signifying an expansion. The same measure for France printed at a 7 month high of 51.6, beating expectations for a fourth straight month of contraction. The headline print for the euro area climbed to 52.3 in February, higher than forecasts and indicating some resilience in the economy. The manufacturing sector continued to decline across the board, whilst services remained upbeat, as higher borrowing costs and energy reliant processes continue to have an impact.
The Euro lost ground against the Dollar and Sterling this morning, as investors digest prints in both the UK and Euro zone. Stocks opened lower with technology and commodities leading the decline, the Stoxx 600 gauge trades 2.4% down this morning.USD
US futures declined ahead of Tuesday’s market reopening as the market weighs the prospect of central banks tightening policy more than previously expected, following the moderation of disinflation expectations from CPI, PPI, and Retail Sales which all released last week. Consequently, the dollar ticked higher by 0.25%.
US President Joe Biden made a surprise visit to Kyiv, where he gave a joint address alongside his Ukrainian counterpart, Zelensky, who thanked Biden for the US’ “unwavering” support for Ukraine. Biden pledged a further $500m in military aid. On the other side of the conflict, Putin is set to deliver his State of the Union speech today, which is expected to largely focus on the war.
Interest rate expectations have slowly creeped higher over last week. Last Monday there was a 4% chance of a 0.5% hike at the next meeting. Following last week’s data, and FOMC rhetoric, this has risen to a 15.6 chance.ASIA/PACIFIC
The Japanese 10-year yield briefly rose above the Bank of Japan’s 0.5% yield curve control target. The market is adjusting ahead of Kazuo Ueda hearings in parliament on Friday. Ueda is the nominee for the Bank of Japan governorship, who some believe will be more hawkish than the outgoing Kuroda.
China’s banks held their prime lending rates steady as expected. Given January’s record boom in new loans, there was little appetite to trim borrowing costs. The delicate balance of the economic recovery could push the PBOC, and banks to lower borrowing costs in order to provide an extra monetary boost to growth.ILS
A majority of Israeli voters oppose the governments plans for judicial overhaul according to a survey announced yesterday. Tens of thousands of Israelis protested the bill yesterday ahead of its first reading in the Knesset.
USDILS trades higher as dollar strength and shekel weakness combines to push USDILS to the 3.6 handle this morning.Data & Events
UK Feb. PMIs
Germany Feb ZEW Survey
US Feb. PMIs
US Jan. Existing Home Sales
Trading in financial instruments may involve a high degree of risk and may not be suitable for all investors. Trading in financial instruments can result in both loss and profit. Investors should carefully consider whether financial instruments suit their needs, financial resources and personal circumstances.
The information contained in this material is solely for informational purposes only and it is not and should not be construed as an offer or a solicitation of an offer to buy or sell any financial instruments and cannot be relied upon as a representation that any particular transaction necessarily could have been or can be effected at the stated prices. This material does not contrue advice.
For more analysis on FX markets or information regarding SVB's FX services:
0800 023 1440 from within the UK
+44 207 367 7880 from overseas
See all of SVB's latest FX information and commentary.
© 2023 SVB Financial Group. All rights reserved. SVB, SVB FINANCIAL GROUP, SILICON VALLEY BANK, MAKE NEXT HAPPEN NOW and the chevron device are trademarks of SVB Financial Group, used under license. Silicon Valley Bank is a member of the FDIC and the Federal Reserve System. Silicon Valley Bank is the California bank subsidiary of SVB Financial Group (Nasdaq: SIVB).
Silicon Valley Bank is registered in England and Wales at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, UK under No. FC029579. Silicon Valley Bank is authorised and regulated by the California Department of Business Oversight and the United States Federal Reserve Bank; authorised by the Prudential Regulation Authority with number 577295; and subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Silicon Valley Bank is a subsidiary of SVB Financial Group, a Delaware corporation and is an affiliate of SVB Financial Group UK Limited. SVB Financial Group UK Ltd is registered in England and Wales at Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, UK under No. 5572575 and is authorised and regulated by the Financial Conduct Authority, with reference number 446159. SVB Financial Group and its subsidiary Silicon Valley Bank are members of the Federal Reserve System and Silicon Valley Bank is a member of the FDIC.
Your eligible deposits with Silicon Valley Bank UK are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit guarantee scheme. Any deposits you hold above the limit are unlikely to be covered. Please click here for further information or visit http://www.fscs.org.uk. For more detailed information about coverage and limits, please review our FSCS Information Sheet at http://www.fscs.org.uk.
This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
Foreign exchange transactions can be highly risky, and losses may occur in short periods of time if there is an adverse movement of exchange rates. Exchange rates can be highly volatile and are impacted by numerous economic, political and social factors, as well as supply and demand and governmental intervention, control and adjustments. Investments in financial instruments carry significant risk, including the possible loss of the principal amount invested. Before entering any foreign exchange transaction, you should obtain advice from your own tax, financial, legal, accounting and other advisors, and only make investment decisions on the basis of your own objectives, experience and resources. Opinions expressed are our opinions as of the date of this content only. The material is based upon information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such.