UK narrowly avoids recession, Zelensky visits EU parliament, Israeli consumer sentiment drops considerably
February 10, 2023
Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.
GBP/USD 1.2087 GBP/EUR 1.1300 EUR/USD 1.0697 USD/CAD 1.3447 EUR/CHF 0.9883 EUR/SEK 11.1661 EUR/NOK 10.9003 EUR/DKK 7.4451 USD/ILS 3.5171 AUD/USD 0.6924 NZD/USD 0.6319 USD/SGD 1.3284 USD/JPY 131.15 USD/CNH 6.8174 USD/INR 82.5406 EUR/ILS 3.7620 GBP/ILS 4.2511 USD/ZAR 17.8517
According to the ONS, the UK managed to avoid recession last year by the narrowest of margins - GDP was unchanged in the fourth quarter following a revised 0.2% decline in Q3. The cost-of-living crisis and industrial action across the UK slammed the economy in December - output for this month alone dropped 0.5%. The UK is the only G7 nation with GDP levels to remain below pre-pandemic levels, with the economy coming in 0.8% smaller than its size at the end of 2019.
BOE's Bailey spoke yesterday, noting the risks that inflation remain well above the UK’s 2% target for some time. Although the MPC believes inflation will fall, public sector pay rises may lift inflation further and that they need to watch for greater persistence in CPI. Other MPC members stated that the BOE must guard against raising rates too far, as there is a risk over-steering if there are lags in transmission. Meanwhile Tenreyro believe rates are too high and that only 1/5 of the rises have fed through to UK.
After a choppy Thursday reaching highs of 1.2194 and before retreating again, GBPUSD gained on the print with the pair sitting in the 1.2135 region as we print up 0.63% this week. GBPEUR continued its steady uptrend sitting in the 1.1285 region up 1.09% this week. The FTSE opens -0.22% as we print.EUR
EURUSD is little changed entering Friday’s European session, after retreating from yesterday’s high of 1.0790. The Stoxx 600 snapped its recent rally, declining 0.7% on open as the treasury sell off continued.
European leaders met at the EU summit yesterday to discuss several issues including the ongoing Russia/Ukraine conflict. French President Macron has not ruled out sending fighter jets to Ukraine, however reconfirmed that the priority is more immediate military aid as aircrafts would require significant pilot training and will therefore take some time to deploy. Moscow has commented previously that support of Western fighter jets would prolong the conflict. Leaders also discussed border control and increasing concerns over higher levels of immigrant crossings, with some calling for more budget allocation to build border infrastructure.
Russian Deputy PM Novak announced the countries plans to cut oil production by 500,000 barrels a day in March, in response to western price caps. The production cut, which equates to around 5% of January’s output, threatens to renew the turmoil seen in oil markets last year. Oil prices rallied on the news, with Brent Crude gaining 1.8% in the early London session.USD
The narrative for an engineered soft landing by the federal reserve has been increasingly optimistic as of late, notably after last week’s upside surprise in the jobs report. However, several models including Jerome Powell’s preferred yield-curve indicator shows the chance of a recession rose sharply in January.
US jobless claims crept higher yesterday after several weeks of decline, however there is expected to be a moderate rise in layoffs over the near term, as job cuts remain limited to a small number of sectors, notably the tech sector. Jobless claims increased to 196,000 from 183,000 prior.
February’s preliminary reading on consumer sentiment may be boosted off the back of the January jobs report. The headline reading is expected to rise to 65.5 from 64.9 prior.ASIA/PACIFIC
Japan’s government plans to submit nominations for the Bank of Japan leadership to parliament on Feb 14. Hearings for the candidates are due around the 24th Feb. Japan’s PPI growth slowed to 9.5% in January from a revised 10.5% in December.
China’s cash squeeze eased, as the gauge for overnight funding costs, dropping after the PBOC provided $150 billion of stimulus.ILS
Israel’s consumer confidence fell to 70 in January from 84 in December, highlighting the impact of the political uncertainty introduced by plans to overhaul the judicial system. USDILS trades above 3.5 as of this morning, 0.34% higher intraday.
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