Powell says further rate hikes needed, UK growth forecasts slashed for 2023, Schnabel hints at 0.50% hike in March
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February 8, 2023
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GBP/USD 1.2079 GBP/EUR 1.1245 EUR/USD 1.0743 USD/CAD 1.3380 EUR/CHF 0.9874 EUR/SEK 11.3421 EUR/NOK 11.0314 EUR/DKK 7.4430 USD/ILS 3.4688 AUD/USD 0.6976 NZD/USD 0.6329 USD/SGD 1.3243 USD/JPY 130.97 USD/CNH 6.7920 USD/INR 82.6063 EUR/ILS 3.7263 GBP/ILS 4.1901 USD/ZAR 17.5416
It is reported that more than £4.4bn of taxpayer’s money has been paid out to British banks to cover fraud and default on the £77bn state-granted loans to businesses during the covid pandemic. Across all coronavirus loan schemes, the recent figures showed that only £14.5bn of the £77bn has been repaid.
The heads of the top four British banks were accused by MPs yesterday of failing to pass on higher interest rate benefits to savers - despite the BOE implementing 10 consecutive rate hikes, most savers are offered an interest rate of less than 1% for their easy access savings accounts.
The NIESR cuts the UK's growth outlook for 2023, mainly driven by cost-of-living standards. They also cut their GDP forecast growth this year to 0.2% from 0.7% and sees growth of 1.0% in 2024, down from 1.7%.
GBPUSD was mixed yesterday, reaching lows of 1.1961 and highs of 1.2080 mainly driven by USD movement Powell giving the data dependent message once again. GBPEUR has been on a gradual uphill trend, sitting in the 12145 region as we print up 0.7% this week. The FTSE opens in the green up 0.36% as we print.EUR
ECB member Isabel Schnabel confirmed recent comments that the ECB intends to raise interest rates by 50bps in March, citing the road to target inflation of 2% is far from over. Comments were supported by Policymaker Villeroy, confirming the period of ultra-low interest rates is over and are likely to remain “more normal” for the medium term.
European shares continued on an upward trend, with the Stoxx Europe 600 gaining 0.6% following positive earnings reports. Energy shares were boosted as Equinor ASA Q4 profit rose by one third, whilst ABN Amro Bank NV pushed banking stocks higher following a share buyback announcement. EURUSD reversed its recent trend, stabilizing above 1.0700, despite hawkish remarks from Jerome Powell. The par is up 0.2% this morning to trade around 1.0750.USD
Federal Reserve Chair Jerome Powell reiterated his message that interest rates need to keep rising to quash inflation and this time the markets listened. This was Powell’s first opportunity to speak since the jobs reports shocked markets last Friday. Despite the message remaining the same, against the backdrop of robust employment figures, both bonds and equities initially sold off before equities recovered to close the session higher. The dollar initially whipsawed before slipping by 0.8% from yesterday’s highs.
US Consumer borrowing rose by $11.6 billion in December, the smallest amount in nearly two years.ASIA/PACIFIC
USDJPY continues its downward trend this morning, as investors digest the prospect of a change in Bank of Japan policy. The pair slipped 1.2% yesterday, the biggest one day drop for nearly one month, following the strongest wage growth print since 1997.
The Central Bank of India raised benchmark rates by 25bps, keeping their policy stance unchanged, despite some investors expecting a more dovish tone. The rupee remained unchanged, whilst Indian bonds fell. Emerging market currencies were mixed, with the MSCI Index unchanged. The Phillipine Peso gained 50bps against the Dollar, as central bank Governor Medalla commented that it is ready to “adjust monetary policy settings” following a 14year high inflation print.ILS
Some Israeli firms are withdrawing funds from Israeli banks, joining private sector opposition to the government judicial plans. USDILS trades lower than yesterday’s highs which briefly trade above 3.49, currently trading at 3.46.Data & Events
Italy Retail Sales
ECB Enria, Elderson, Knot set to speak
Fed Williams set to speak
Poland Rate Decision
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