February 1, 2023

“Fed Chair Jerome Powell’s press conference, which follows the rate announcement later today, will be closely watched as investors seek clarity on the future path of interest rate increases. The Fed is widely expected to reduce the pace of rate hikes to 25bps, following a 50bps increase in December.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Reports indicate that the FBI conducted a search of an office previously used by President Biden in mid-November, after his lawyers found a small number of classified documents in the space. The search was done with the cooperation of Biden’s lawyers and was not publicly disclosed by the White House or the Justice Department. It is unclear if any additional classified materials from Biden’s time as Vice President were found.

Today, as many as 500,000 workers are expected to go on strike, causing significant disruptions at the border, the closure of numerous schools, and train line suspensions. Unions claim that negotiations to end the strikes have been “going backwards” and accuse the government of “deceiving the public” by halting talks with NHS workers and rail unions. Government sources have privately admitted that the optimism about resolving the strikes earlier in the month has diminished.

GBP

Sterling is weaker than most major currencies in the early morning trade. The British Pound is currently experiencing difficulties in anticipation of the Bank of England’s upcoming interest rate adjustment tomorrow, as the market expectations for a “dovish” decision and overall negative outlook on the UK’s economic performance weighs on the currency. Initially, the market expected the Bank to raise interest rates by 50 basis points, however, as evidence of the UK economy slowing down as a result of previous rate hikes emerges, expectations have shifted towards a more modest increase of 25 basis points.

EUR

Euro is well bid against most major currencies overnight. The inflation rate in the Eurozone experienced a decrease for the third month in a row in January. However, the reduction may not have a significant impact, as the underlying rate of price growth remains constant, and there are concerns regarding the reliability of the reported figures. The European Union’s statistical agency, Eurostat, reported that inflation in the 20-nation currency bloc decreased from 9.2% in December to 8.5% in January.

USD

The dollar is stronger against sterling and weaker against euro this morning. The global stock market saw a modest increase, as the signs of decelerating wage growth in the United States fuelled expectations that the Federal Reserve may signal the termination of interest rate increases during its meeting later today. The Wall Street indexes showed an upward trend, while bonds showed a less pronounced rise, and the dollar surrendered its overnight gains. The decrease in the growth of wages was revealed by the US Employment of Status Index, which is the Federal Reserve’s preferred measure of wage growth, when it indicated a 1% rise in the last quarter, the smallest increase seen in the past year.

Markets

The pan-European Stoxx 600 index experienced a slight increase of 0.2% during mid-morning trade, following two consecutive sessions of decline. The travel sector saw the greatest gain, rising by 1.3%, with the industrial and construction industries also showing growth at 1%. Conversely, the insurance sector witnessed a decrease of 0.44%. According to preliminary data released today, inflation in the Eurozone was recorded at 8.5% in January. Yesterday, US stocks demonstrated an upward trend, closing a prosperous January with a continuous succession of corporate earnings and the initiation of the Federal Reserve’s latest policy meeting. The S&P 500 recorded a rise of 1.5%, having accumulated a growth of over 5% for the month, while the Dow Jones Industrial Average increased by 1.1%.

Main Economic Data/Central Banks/Government (All Times CET)

7:00 a.m.: Russia Jan. S&P Global Manufacturing PMI
8:00 a.m.: UK Jan. Nationwide House Prices Index
8:00 a.m.: Turkey Jan. S&P Global/ICI Manufacturing PMI
9:00 a.m.: Hungary Jan. Manufacturing PMI
9:00 a.m.: Poland Jan. S&P Global Manufacturing PMI
9:15 a.m.: Spain Jan S&P Global Manufacturing PMI
9:30 a.m.: Czech Republic Jan. S&P Global Manufacturing PMI
9:45 a.m.: Italy Jan. S&P Global Manufacturing PMI
9:50 a.m.: France Jan. S&P Global Manufacturing PMI
9:55 a.m.: Germany Jan. S&P Global/BME Manufacturing PMI
10:00 a.m.: Euro-area Jan. S&P Global Manufacturing PMI
10:30 a.m.: UK Jan. S&P Global/CIPS Manufacturing PMI
11:00 a.m.: Italy Jan. CPI
11:00 a.m.: Euro-area Jan. CPI
5:00 p.m.: Russia Dec. Industrial Production
OPEC+ ministerial meeting

Corporate Events

Earnings include Nomura, Novo Nordisk, GSK, Novartis, Meta, Peloton, Thermo Fisher Scientific, Humana, MetLife, MicroStrategy

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