US rates may rise further following blowout jobs report, UK cabinet reshuffle begins following Zahawi dismissal, Euro-area retail sales decline.
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February 7, 2023
GBP/USD 1.2024 GBP/EUR 1.1215 EUR/USD 1.0721 USD/CAD 1.3410 EUR/CHF 0.9921 EUR/SEK 11.3731 EUR/NOK 11.0726 EUR/DKK 7.4424 USD/ILS 3.4660 AUD/USD 0.6943 NZD/USD 0.6332 USD/SGD 1.3261 USD/JPY 131.78 USD/CNH 6.7929 USD/INR 82.6850 EUR/ILS 3.7159 GBP/ILS 4.1675 USD/ZAR 17.6248
GBPUSD continued to trade below the 1.2100 handle yesterday, and briefly dipped below 1.20 this morning before rebounding to sit in the 1.2030 region as we print. GBPEUR has rebounded from Friday's lows, and sits above the 1.1200 handle as we print. The FTSE has gained 0.44% since the open.
According to Halifax, the UK housing market stabilized in January, with property prices coming in on average, unchanged, breaking 4 months of decline. The lender calculates house prices based on the mortgages they write. Halifax does however still expect the market to weaken this year.
The BOE and the UK Treasury have stepped up their planning for a digital currency, to sit alongside the physical banknotes - the currency which has been unofficially coined "Britcoin" could present significant opportunity for consumers and businesses in the second half of the decade.EUR
Pressure on the Euro has continued, trading 60bps lower against the Dollar on the week so far. Risk aversion continues to dominate markets, pushing the US Dollar higher across the board, whilst disappointing data from the Eurozone added to the downward trend. Retail sales for the Euro area declined -2.8%, marginally worse than forecast. Data into this morning also failed to boost the single currency, with French Balance of Trade figures showing the trade deficit more than doubled in 2022, mainly due to higher energy costs. German industrial production also fell more than expected, decreasing by 3.1% on the previous month.
EBC policymakers yesterday appeared less hawkish than their Fed counterparts, with Austrian central bank chief Robert Holzmann citing the risks of not doing enough, dwarf the risk of over-tightening. Focus will be on speeches from four ECB members today and any further confirmation that a rate hike may also be on the cards for May. European stocks advanced, with the Stoxx 600 up 0.2% as energy stocks outperformed.USD
Federal Reserve voting member Bostic has said that the jobs blowout raises the possibility that the FOMC will need to raise rates further. Whilst reiterating the case for rates to reach 5.1%, he stated that if the economy continues to show robustness despite tighter monetary conditions that the central bank will “have to do a little more work”.
The US has started to recover parts from the Chinese balloon which was shot down off South Carolina. White House officials said the US was still trying to figure out how much senior leaders in Beijing new about the alleged spy mission. Biden dismissed claims that this incident has weakened Sino-US relations, claiming that the Chinese understood the US position.
US equities sold-off slightly as markets await commentary from Fed chair Jerome Powell later today to provide clarity over how monetary policy will adjust following last Friday’s jobs report. The NASDAQ closed 1% lower. The dollar steadied after making small gains through yesterday.ASIA/PACIFIC
Australia’s central bank raised interest rates by 0.25% and gave forward guidance that further tightening will be needed to ‘crush’ inflation. The Aussie gained 0.7% against the dollar and bond yields pushed higher. The RBA has lagged international counterparts in its hiking cycle, having raised 3.25% compared to 4% in NZ and 4.5% in the US, reflecting Governor Lowe’s efforts to achieve a soft landing.
Measures of China’s financial risk eased in early February. Improved liquidity has enabled smaller banks and non-bank institutions to get funding, whilst the yuan’s appreciation reduced the risks associated with capital outflows.ILS
Bank of Israel governor Amir Yaron, who largely avoids political involvement, carefully waded into the ongoing debate over judicial reforms. He stressed that “strong and independent” institutions were essential for a prosperous and developed economy. These were Yaron’s first comments on the matter. USDILS stabilised around 3.47, after making significant gains yesterday morning.Data & Events
- Central Bank Speakers
- BOE - Ramsden, Pill, Cunliffe
- ECB – Villeroy, Schnabel
- FED – Powell
- Biden delivers State of the Union Address
- UK Cabinet Reshuffle begins
- Central Bank Speakers
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