Powell to dispel expectations of a Fed pivot, UK inflation rampant as store prices accelerate in January, Euro-Area GDP beats consensus.
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February 1, 2023
GBP/USD 1.2318 GBP/EUR 1.1316 EUR/USD 1.0886 USD/CAD 1.3304 EUR/CHF 0.9973 EUR/SEK 11.3405 EUR/NOK 10.8370 EUR/DKK 7.4392 USD/ILS 3.4432 AUD/USD 0.7074 NZD/USD 0.6443 USD/SGD 1.3126 USD/JPY 129.92 USD/CNH 6.7451 USD/INR 81.9038 EUR/ILS 3.7481 GBP/ILS 4.2412 USD/ZAR 17.3718
Inflation pain for the UK continues with store price gains accelerating to 8% in January, the highest rate since at least 2005. Industrial action spurred by the rising cost of living, continues to cause havoc with 475k workers striking across the nation today. Trains will be striking whilst 85% of schools will be shut.
A slowdown in the UK housing continues, with the Nationwide House Price Index showing 1.1% growth in January, slower than the 1.9% surveyed, versus 2.8% printed a month earlier.
Rishi Sunak faces a huge test to his authority as he plans to sell an outline deal on the Northern Ireland protocol to pro-UK unionist politicians and Eurosceptic tory MPs. After months of negotiations, it seems a deal is taking shape.
GBP has continued to retreat this week, sitting in the 1.2320 region down 0.51% since Monday’s open.EUR
A flurry of fundamental data at the start of the week has enhanced focus on tomorrow’s ECB interest rate decision, with mixed results increasing uncertainty over the central banks next move. Although down on the previous month, European GDP figures beat expectations to print at 1.9% YoY yesterday, whilst German retail sales showed a surprise decline of – 6.4% YoY. German Unemployment Rate came in unchanged, in line with forecasts at 5.5% and this morning’s manufacturing PMIs for France, Germany and the Euro Area all beat the previous month with the French release the only one falling behind market forecasts. Unemployment and Inflation figures for the Euro Area today are likely to provide some more clues ahead of tomorrow’s decision.
The Stoxx Europe closed January on a high note, printing a 6.7% gain for the month, the best start to the year since 2015. EURUSD has added to yesterday’s advance, gaining another 20bps this morning to approach the 1.09 handle, as the dollar weakened on softer than anticipated dataUSD
Slower wage growth has cemented notions that the Fed has room to ease its tightening. December and January have seen a flurry of economic releases which show that tighter monetary conditions are weighing on economic activity and slowing demand. As the Fed approaches the peak of its tightening cycle, consumer confidence has slipped slightly by 1.9 points to 107.1.
Ahead of the FOMC’s rate decision today, with a 0.25% hike all but certain, many expect Powell to signal the peak rate still reaching 5.25%, and in contrast to market expectations will indicate that he doesn’t see policymakers lowering rates at all in 2023. If markets believe this forward guidance, we could see some USD strength as markets accept that higher rates are here for longer.ASIA/PACIFIC
Following on from China’s strong official PMIs, the Caixin PMI painted a different picture. The Caixin PMI highlighted that a significant part of the economy continues to struggle. Overall, the picture is improving, but the rebound is not as robust as shown in the official PMIs.
Modi’s new team delivered a pro-growth budget which focuses on public infrastructure investment whilst also tightening the belt on public finances.ILS
USDILS trades 0.3% lower intraday, as the shekel regains some strength. PM Netanyahu was seen alongside Billionaire Gautam Adani as they advocated for further investment in Israel’s ports. The event was welcome for Netanyahu who has faced much criticism that under his government, Israel is losing its appeal to investors.Data & Events
Italy Jan CPI
Euro-Area Jan CPI
Fed Rate Decision
OPEC+ Ministerial Meeting
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