January 10, 2023

“The greenback sank near a seven-month low against other major currencies this morning, as investors took comfort that the Federal Reserve may be nearing the end of its rate-hike cycle and as China’s reopening drove demand for riskier assets.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The Republican-led US House of Representatives adopted a package of internal rules that give right-wing hardliners more leverage over the chamber’s newly elected Republican speaker, Kevin McCarthy. The rules package represented an early test of McCarthy’s ability to keep his caucus together, after he suffered the humiliation of 14 failed ballots last week before finally being elected speaker on Saturday. The legislation includes key concessions that hardliners sought. The changes include allowing a single lawmaker to call for his removal at any time.

Barclays is joining forces with an insolvency specialist to try to recover millions of pounds of misappropriated loans advanced under the UK government’s Covid-19 bounce back scheme. The bank is among the lenders that provided loans of up to £50,000 to small companies at the height of the pandemic. About £46bn was given to companies with only minimal eligibility checks to encourage banks to lend quickly. The scheme has attracted controversy as official estimates suggest UK taxpayers now face losses of more than £1bn from fraudsters who exploited the programme.

GBP

Sterling is weaker than most major currencies in the early morning trade. The UK government will cut energy support to businesses starting in April as Jeremy Hunt seeks to shore up public finances. The new 12-month program will be worth up to £5.5 billion, compared with the six-month, £18 billion subsidy it will replace. UK Health Secretary Steve Barclay told union officials he’s open to backdating the next pay rise for health workers, in a bid to halt the strikes crippling public services. Weak confidence around personal finances and a squeeze on disposable income will hold back growth in food retail sales to around 5% in 2023.

EUR

Euro is well bid against most major currencies this morning. East European nations started 2023 with a flurry of dollar bond issuance, putting the region on track for a record year as it rediscovers the foreign-debt market beyond its traditional euro-denominated sales. Thanks to three-part deals from Hungary and Romania last week, sovereign dollar debt supply from the region has topped $8 billion. The French government has angered anti-hunt campaigners after refusing to ban hunting on Sundays during the season.

USD

The dollar is stronger against sterling and weaker against euro this morning. The latest in a string of Pacific storms blamed for at least 12 deaths-soaked California on Monday, prompting evacuations of some 25,000 people, including the entire town of Montecito and nearby areas of the Santa Barbara coast, due to heightened flood and mudslide risks. Thousands of nurses at two New York City hospitals went on strike yesterday after contract negotiations stalled over pay and staffing levels, a move that caused one of the facilities to postpone procedures and appointments.

Markets

European stocks fell and Wall Street equity futures edged lower as investors weighed hawkish comments from Federal Reserve officials and looked toward the release of US inflation data due on Thursday for clarity on the trajectory for interest rates. The Stoxx Europe 600 Index dropped 0.6%, retreating from an eight-month high as consumer products, construction and retail stocks led declines. Contracts on the S&P 500 and Nasdaq 100 pared their losses.

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

8:00 a.m.: Denmark Dec. CPI
8:00 a.m.: Sweden Nov. Industrial Orders
8:00 a.m.: Norway Dec. CPI
8:00 a.m.: Turkey Nov. Industrial Production
8:45 a.m.: France Nov. Industrial Production
9:00 a.m.: Austria Nov. Industrial Production
11:00 a.m.: Riksbank’s Thedéen speaks
11:10 a.m.: BOE’s Bailey, ECB’s Schnabel, Macklem speak
2:30 p.m.: Ukraine Dec. CPI
3:00 p.m.: Fed’s Powell discusses central bank independence
4:35 p.m.: ECB’s de Cos, Knot speak
World Bank expected to release global economic prospects report

Corporate Events

Earnings include Albertsons, TD Synnex
DoubleLine CEO Jeffrey Gundlach holds his annual “Just Markets” webcast to discuss the economy, markets and his investment outlook

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