Fed meeting begins with 0.25% heavily expected, UK anticipated to be the only economy to slide into recession, Bank of Israel presents strategy to ministers.
Looking for some in-depth market insights? Check out our latest edition of SVB FX Navigator
January 31, 2023
GBP/USD 1.2312 GBP/EUR 1.1385 EUR/USD 1.0814 USD/CAD 1.3453 EUR/CHF 1.0038 EUR/SEK 11.3121 EUR/NOK 10.8752 EUR/DKK 7.4391 USD/ILS 3.4754 AUD/USD 0.7009 NZD/USD 0.6428 USD/SGD 1.3173 USD/JPY 130.39 USD/CNH 6.7585 USD/INR 82.0363 EUR/ILS 3.7583 GBP/ILS 4.2789 USD/ZAR 17.4543
The UK is expected to be the only economy to slide into recession this year, according to the IMF, caused by a fall in household spending from high energy prices, rising mortgage costs and increased taxes. They predict the economy will shrink 0.6% in 2023, the only contraction in G7. Industry groups are urging Rishi Sunak’s government to set out more ambitious plans to cut greenhouse gases by producing clean energy jobs, otherwise the UK risks being left behind the US and EUR, who are currently boosting incentives for green technology. It is reported by Bloomberg Economics that Brexit is costing the UK economy £100 billion a year – economists think the economy is 4% smaller than it might have been. The FTSE has dropped 0.38% since the open. GBP has retreated this morning to sit in the 1.2310 region after reaching highs of 1.2417 yesterday vs the USD. GBPEUR was mixed yesterday reaching highs of 1.1414 and lows of 1.1360 and sits now in the 1.1395 region as we print.EUR
French GDP ticked marginally higher in Q4 2022, expanding 0.1% from the previous quarter, a touch above forecasts. The economy was held back by strikes and high energy costs in particular. Despite gaining in the final quarter, expectations are for a contraction of 0.2% in Q1 as household energy bill price caps are being raised by 15% this month and next. French inflation increased 7% in January to print just below the post-covid high seen in October and November last year. The acceleration not only adds to contraction concerns for the first three months of the year but supports recent rhetoric from the ECB that inflationary pressures still remain. EURUSD closed lower yesterday, as markets seem to be consolidating below 1.0850 ahead of this week’s Central Bank decisions. The pair reached a one week low during early trading on Tuesday, entering its fourth consecutive day of declines.USD
As the Fed’s first meeting of 2023 begins today, it is widely expected that the FOMC will opt to downshift to a 0.25% hike. Jerome Powell may signal that the terminal rate remains at 5.25%. The market has begun building expectations of a rate-cut towards the end of 2023, this is one item Powell might dispel with his forward guidance. Last month. CPI, PPI and PCE all showed signs of moderation, however the Fed chair’s preferred metric, PCE Core Services, has hardly showed signs of slowing. Furthermore, the Employment Cost Index, which highlights wage pressures may keep Powell in a hawkish mood. It is expected to decelerate but remain too hot to alter any FOMC rhetoric.
The Biden administration is considering cutting Chinese tech firm, Huawei, from US suppliers in a bid to crackdown on the China’s Tech. Sales have been limited for the last four years, however, lawmakers are now exploring a complete ban on all sales to Huawei.
The dollar has gained almost 0.6% over the last three days, as risk-off action on equities bolsters the greenback. The NASDAQ closed 2% lower yesterday.ASIA/PACIFIC
China’s latest PMI data shows the economy bouncing back from its covid setback. Official non-manufacturing PMI soared from 54.4 from 41.6, whilst manufacturing PMI rose from 47.0 to 50.1. This was despite the backdrop of the lunar new year, which highlights the resurgence of economic activity.
Weak industrial output is weighing on Japan’s recovery. Production fell on month-on-month basis for the third time in four months in December.ILS
Yesterday, the Bank of Israel presented government ministers with a strategic program to accelerate economic growth. The plan hinged on six topics which were vital for a advancing the economy. USDILS advanced on gains made yesterday, trading above 3.47.Data & Events
Italy Dec. Unemployment Rate
UK Dec. Mortgage Approvals
Euro-Area 4Q GDP
Italy 4Q GDP
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.