February 2, 2023

“The US dollar declined last night after Fed Chair Powell’s dovish statement that US have reached a turning point in the struggle against inflation, lifting market confidence that the central bank’s interest rate hikes would soon come to an end. Meanwhile, the ECB and BoE are both expected to increase interest rates today and will set out plans for additional hikes over the coming months.”

Tim Hallinan – Trading Director

Main Headlines

According to an analysis of official data, England’s environmental regulator has issued thousands of written warnings to water companies regarding suspected offenses since 2015. Over the course of 2015 to 2022, 9 water companies and one recycling group received a total of more than 2,800 warning letters, civil sanctions, and enforcement notices for alleged offenses. Environmental organizations have stated that the findings highlight the regulator’s inability to hold companies accountable, citing years of funding cuts as the root cause of this problem.

Mark Zuckerberg revealed plans to tighten Meta’s financial control in a year he has referred to as “the year of efficiency” for the social media company. Shares rose due to better-than-expected sales, a forecast of reduced expenses, and a new $40 billion share buyback. Meta’s fourth-quarter revenue was reported as $32.2 billion yesterday, representing a 4% decrease from the previous year but in line with the company’s guidance and slightly higher than expected by analysts. The company also reduced its 2023 expenses outlook by $5 billion and added $40 billion for share buybacks.

GBP

Sterling is weaker than most major currencies in the early morning trade. The Bank of England is expected to announce a 50-basis point increase in interest rates today, with investors closely monitoring any hints regarding future decisions. Unions have reported that British Steel is considering cutting over 800 jobs at its main UK plant, which raises concerns about a potential £300 million government support package. The EU has warned that any leaks of confidential discussions with the UK regarding the post-Brexit trading arrangements in Northern Ireland could undermine the possibility of a mutually agreed-upon deal.

EUR

Euro is well bid against most major currencies this morning. Franck Viger-Brunet, a French railway worker, states that he and his colleagues must weigh the costs of striking to pressure President Emmanuel Macron to abandon his plan to raise the retirement age by two years to 64. Spain and Morocco are holding their first bilateral summit in 8 years today, aiming to strengthen economic relationships and build upon a diplomatic agreement reached last year after disagreements regarding migration and territorial issues.

USD

The dollar is stronger against sterling and weaker against euro this morning. The US Federal Reserve raised its benchmark interest rate by 0.25% today but warned that further increases will be necessary to curb inflation. At his first press conference of 2023, Jerome Powell emphasized the Federal Reserve’s steadfast determination to eliminate high inflation. US President Joe Biden and Speaker of the House Kevin McCarthy showed a willingness to continue negotiations over the debt ceiling after their initial meeting on the subject on Wednesday, though they still disagree on how to prevent a default.

Markets

European stocks climbed with US equity futures, building on Wall Street’s advance after Federal Reserve Chair Jerome Powell said the central bank had made progress in its battle against inflation. The Stoxx Europe 600 index added about 0.6%, with traders now looking ahead to the European Central Bank’s policy decision later tofay after mixed inflation data reignited debate about how much rates in the euro area should rise. Technology stocks led the advance, buoyed by an upbeat outlook from German chipmaker Infineon Technologies AG. Futures on the S&P 500 and Nasdaq 100 rose, suggesting Wall Street is set to build on Wednesday’s gains.

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

9:00 a.m.: Spain Jan. Unemployment Change
9:30 a.m.: SNB’s Maechler Speaks
1:00 p.m.: BOE Rate Decision
1:30 p.m.: BOE’s Bailey Speaks
2:15 p.m.: ECB Rate Decision
2:30 p.m.: Czech Republic Rate Decision
2:45 p.m.: ECB’s Lagarde Speaks
4:50 p.m.: SNB’s Moser Speaks
6:30 p.m.: SNB’s Jordan Speaks
7:30 p.m.: ECB’s Lagarde Speaks

Corporate Events

Earnings include Deutsche Bank, Santander, Nordea Bank, Julius Baer, ING, Danske Bank, Shell, Ferrari, Apple, Amazon, Alphabet, ConocoPhillips, Merck & Co., Eli Lilly, Ford, Qualcomm

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