February 22, 2023

“Investor sentiment was holding a negative tone yesterday as flash PMI readings for February from the US, Eurozone, and UK, printed ahead of expectations. The indications of economic resilience prompted traders to anticipate additional interest rate increases from the Federal Reserve in the coming months, triggering a 0.3% rise in the dollar and sterling to rally against its major peers.”

Tim Hallinan – Trading Director

Main Headlines

Joe Biden reiterated the United States’ pledge to support European security and asserted that Vladimir Putin’s conflict in Ukraine would not triumph. At a speech held outside the Royal Castle in Warsaw, Biden stressed the potency of democracy over autocracy, framing the struggle between the two as a worldwide issue. Biden condemned Russia’s aggression in Ukraine as a “murderous assault” but acknowledged Ukraine’s steadfastness in the face of the invasion.

The UK government is considering changes to its plans for a register of “foreign influence” in response to criticism from the US, EU member states, and business executives. The proposed Foreign Influence Registration Scheme, which is part of the national security bill, has been accused of potentially damaging relationships with key allies and harming inward investment. The government is expected to propose concessions to address these concerns in the coming days.

GBP

Sterling is weaker than most major currencies in the early morning trade. Rishi Sunak is reportedly exploring a 5% pay raise for public-sector workers in response to growing strikes, following an unexpected £30bn windfall for the Treasury. Bentley is discontinuing production of its 12-cylinder engine as it shifts towards electrification. Despite claiming to have never been more competitive on pricing, major UK supermarkets are losing customers to German-owned discount retailers Aldi and Lidl.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. Germany’s Ifo expectations gauge is predicted to increase from 86.4 in January to 88.4 in February due to mild weather and an easing of supply-chain constraints. The European Union is finalizing its 10th sanctions package against Russia for its invasion of Ukraine, with a potential agreement to be reached on Wednesday. However, there are disagreements among EU governments regarding a ban on Russian rubber and diamond imports.

USD

The dollar is well bid against most major currencies this morning. The United States may soon prohibit tens of thousands of migrants arriving at the US-Mexico border from claiming asylum as part of its efforts to prevent unauthorized crossings. Meanwhile, a winter storm is moving across the US West, Northern Plains, and Midwest, which is expected to bring blizzards, extreme cold, and record snowfall, posing a risk to travel and transportation.

Markets

Treasuries halted a selloff as investors looked ahead to Federal Reserve minutes before extending a risk-off move on bets of higher-for-longer rates. Stocks and US index futures drifted lower. Contracts on the S&P 500 and Nasdaq 100 indexes slipped at least 0.1% each after the underlying indexes posted the biggest one-day slump in two months. Key US yields fell after rising to new 2023 highs Tuesday. Asian and European stocks declined amid losses for technology and commodity shares. The dollar was marginally higher and oil futures dropped.

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

8:00 a.m.: Germany Jan. CPI
8:45 a.m.: France Feb. Manufacturing, Business Confidence
9:00 a.m.: Riksbank’s Thedeen speaks
10:00 a.m.: Germany Feb. Ifo Survey
10:00 a.m.: Italy Jan. CPI
12:00 p.m.: Israel Jan. Trade Balance
3:00 p.m.: Belgium Feb. Business Confidence
5:00 p.m.: Russia 4Q GDP
5:00 p.m.: Russia Jan. Industrial Production, PPI
Nigeria 4Q GDP
ECB Governing Council meets for a non-monetary-policy meeting
South African Finance Minister Enoch Godongwana presents the national budget

Corporate Events

Earnings include Rio Tinto, Danone, Stellantis, Lloyds Banking Group, eBay, Bumble, Etsy

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