February 17, 2023

“The US Dollar has been gaining strength against other currencies, with the US Dollar Index reaching its highest level since early January. This has been supported by positive economic data and comments from Federal Reserve officials who have expressed a more hawkish stance. As there are no major data releases expected, investors will be closely monitoring speeches from Fed officials Barkin and Bowman leading up to the weekend.”

Tim Hallinan – Trading Director

Main Headlines

New York City’s John F. Kennedy International Airport has confirmed that one of its terminals will be closed today as a result of electrical issues, with both inbound and outbound flights affected. The disruption has hit one of the world’s busiest airports, with officials working to redirect affected flights to other terminals, following the power outage that began yesterday. As a result, some flights scheduled to arrive at JFK were rerouted to other East Coast airports, according to the airport’s website.

NatWest’s pre-tax earnings in 2022 have surged to £5.1bn, marking its highest profit since the bank almost collapsed and was forced to take a £45bn taxpayer bailout at the height of the global financial crisis. The lender has increased its banker bonuses, following a surge in loan and mortgage charges for its borrowers. The UK government still owns 46% of NatWest. This is the first time the bank has recorded a higher profit since 2007 when its earnings hit £10bn.

 

GBP

Sterling is weaker than most major currencies in the early morning trade. Official figures have shown that UK shop sales volumes unexpectedly rose by 0.5% in January after falling in December, although sales dropped 5.1% compared to January of last year. Rising prices, particularly due to energy costs, have placed pressure on millions of households. Although the rate of inflation is starting to ease, at 10.1% it remains near a 40-year high. Online shops were boosted by January sales promotions, according to the Office for National Statistics (ONS)

 

EUR

Euro is stronger against sterling and weaker against the dollar this morning. ECB Governing Council member Gabriel Makhlouf has warned that the bank still has some way to go to sustainably return inflation to its 2% target, with the ECB’s independence and credibility ultimately at stake. The bank has embarked on its steepest ever run of interest rate hikes in a bid to fight inflation, with more hikes expected in the coming weeks and months. Earlier this week, Makhlouf said that the ECB could raise rates to above 3.5% from the current 2.5% and would likely not cut them again this year.

USD

The dollar is well bid against most major currencies overnight. This morning, the US dollar rose significantly to reach a six-week high against a basket of currencies as the release of robust economic data from the US lifted market expectations of an increase in interest rate hikes. The latest data showed that the number of new claims for unemployment benefits dropped unexpectedly last week, while monthly producer prices recorded the biggest increase in seven months in January. As a result, the US dollar gained strength, causing the sterling, euro, and Japanese yen to hit fresh six-week lows this morning.

Markets

European shares opened nearly 1% lower this morning due to renewed bets that the US Federal Reserve would maintain its monetary tightening path, impacting rate-sensitive technology shares. On the other hand, Mercedes-Benz and Sika shares rose, buoyed by strong earnings. The pan-European STOXX 600 index slid 0.9%, with technology shares tumbling 1.8%. In the US, Wall Street ended lower yesterday following unexpectedly strong inflation data and a drop in weekly jobless claims, leading to fears that the US Federal Reserve would continue to raise interest rates in an attempt to contain rising prices.

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

8:00 a.m.: UK Jan. Retail Sales
8:00 a.m.: Sweden Jan. Unemployment
8:45 a.m.: France Jan. CPI
12:30 p.m.: ECB’s Villeroy speaks
2:30 p.m.: US Jan. Import Price Index
2:30 p.m.: Fed’s Barkin speaks
2:45 p.m.: Fed’s Bowman speaks
4:00 p.m.: US Jan. Leading Index
5:00 p.m.: Russia 4Q GDP

Corporate Events

Earnings include Allianz, EDF, Deere, Hermes, Mercedes-Benz, NatWest, Swiss Re