February 23, 2023

“The US Dollar Index rose for the second day in a row on the back of the FOMC Minutes, but its upward trend slowed due to an improved market sentiment this morning. Today, the US is set to release the second estimate of Q4 GDP growth, in addition to the weekly Initial Jobless Claims and the Chicago Fed’s National Activity Index. Meanwhile, Eurostat will publish aggregate inflation data for January.”

Tim Hallinan – Trading Director

Main Headlines

The US Federal Reserve policymakers agreed to reduce the pace of interest rate hikes in their last policy meeting, indicating that their decision would depend on the level of inflation. The policymakers agreed that the rates would need to increase, but smaller-sized hikes would allow them to adjust with the incoming data, balancing the concerns of officials worried about a slowing economy and those convinced that inflation would prove persistent.

British banks are facing stiff competition for mortgage and business borrowers in 2023 as their rising costs and deposit rates paid to savers threaten to outpace flatlining profit margins. Despite reporting strong profits, the banks’ shares have generally stumbled because of margin pressure caused by the banks’ increasing interest rates on loans while keeping deposit rates low.

GBP

Sterling is weaker than most major currencies in the early morning trade. Heathrow Airport, which is owned by a Spanish group and Qatar Investment Authority along with other investors, has reported a smaller annual loss, indicating a slow recovery from the pandemic. However, the airport’s underlying profitability was affected by inflation and reduced passenger numbers. It announced that no dividends were paid in 2022, and none are planned for 2023.

EUR

Euro is well bid against most major currencies overnight. Bulgaria could join the euro zone from January 2025, provided it meets all the entry criteria, according to the European Commission Vice-President Valdis Dombrovskis. Although Bulgaria had initially aimed to adopt the euro in January 2024, it has now abandoned its target as it fails to meet the inflation criteria and has not adopted certain legal changes.

USD

The dollar is stronger against sterling and weaker against euro this morning. A severe winter storm has battered the Northern Plains and Upper Midwest regions of the US with high winds and heavy snow, resulting in the closure of schools and grounding of air travel. Over 50 million Americans were under winter weather advisories, with up to 2 feet of snow and winds of up to 60 miles per hour expected in some areas.

Markets

European markets were slightly up this morning as investors analysed the minutes released by the US Federal Reserve indicating a commitment to fighting inflation through interest rate hikes. The pan-European Stoxx 600 index saw a 0.27% increase in early trade, with tech and retail stocks showing a positive gain of 0.9% and 0.8%, respectively. The Asia-Pacific markets were mixed after the Fed release, while the US stock futures showed a slight uptick yesterday evening.

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

9:00 a.m.: Slovakia Jan. CPI
10:30 a.m.: BOE’s Mann speaks
11:00 a.m.: Euro area Aggregate Jan. CPI
11:00 a.m.: Croatia Jan. CPI
12:00 p.m.: Turkey One-Week Repo Rate
2:30 p.m.: US 4Q GDP, weekly jobless claims
4:00 p.m.: ECB’s de Cos speaks
G-20 finance ministers and central bank governors meet in India through tomorrow

 

Corporate Events

Earnings include Deutsche Telekom, AXA, Keurig Dr Pepper, Bausch Health, Nikola, PG&E, Wayfair, Warner Bros Discovery, Beyond Meat, Alibaba

 

 

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