January 13, 2023

“The greenback is struggling to find demand this morning after having suffered heavy losses against other major currencies yesterday. US inflation data showed a decline to 6.5% in December, from 7.1% in November, raising odds the Fed would slow interest rate hikes. However, a softer tone around the equity markets this morning offered some support to the dollar. In the UK, GDP surprisingly expanded in November by 0.1% compared to the 0.2% contraction anticipated by the market.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Donald Trump is scheduled to venture out of his Mar-a-Lago resort and conduct a swing of presidential campaign events later this month, ramping up efforts to secure the Republican nomination after facing criticism around the slow start to his 2024 White House bid. The former US president is expected to travel to several early voting states for the Republican nomination, the specific states have not been finalised, around the final weekend of January, where he is slated to announce his state-level teams.

The Bank of England has finished unwinding the emergency bond-buying scheme it launched to calm the financial markets after Liz Truss’s disastrous mini-budget last autumn. Threadneedle Street said it had completed the sale of £19.3bn of government bonds three months after it was forced to intervene in markets to halt a run on pension funds. The Bank made a profit of about £3.5bn through the disposals. Amid a rise in government bond prices in recent months, the sale process began on 29 November and was completed yesterday.

 

GBP

Sterling is well bid against most major currencies overnight. The UK economy unexpectedly grew in November, boosting hopes that Britain may yet avoid a recession. Gross Domestic Product (GDP) rose 0.1pc on the previous month, according to the Office for National Statistics (ONS), as the services sector remained in growth despite the soaring cost of living. Experts at the ONS said the slight rise was supported by the technology sector and a strong showing by pubs and bars amid a boost from the winter World Cup in Qatar.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. The cost-of-living crisis triggered by the Ukraine war, the energy crunch, surging inflation and the coronavirus pandemic has become the greatest worry for European Union citizens, according to a new Eurobarometer that shows 45% of respondents are currently having “some” or “a lot” difficulties with their personal income. Additionally, 46% of Europeans admit their standards of living have already decreased as a result of the mounting crises while 39% expect to see a decline sometime this year.

 

USD

The dollar is weaker than most major currencies in the early morning trade. US inflation was 6.5% over the 12 months to the end of December, down from 7.1% in November, the US Labor Department said. That was the smallest increase in more than a year and marked the sixth month in a row that the pace dropped. Some items such as oranges and bananas even saw outright price falls in December compared with November. Overall, prices slipped 0.1% over the month, driven by the fall in petrol prices.

Markets

European markets climbed cautiously this morning after closing the previous session at their highest level since April 2022. The pan-European Stoxx 600 was up 0.4% in early trade, with health care stocks adding 1.1% while autos fell 1.5%. US Stocks closed higher yesterday after December’s consumer price report showed inflation cooled for the month, raising hopes the Federal Reserve can once again slow interest rate hikes. The Dow Jones Industrial Average gained 216.96 points, or 0.64%, to close at 34,189.97. The S&P 500 added 0.34%, to end at 3,983.17.

 

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

7:00 a.m.: Finland Dec. CPI
8:00 a.m.: UK Nov. Industrial Production, Manufacturing Production, Trade Balance
8:00 a.m.: Sweden Dec. CPI
8:30 a.m.: Hungary Dec. CPI
8:45 a.m.: France Dec. CPI
9:00 a.m.: Spain Dec. CPI
10:00 a.m.: Italy Nov. Industrial Production
10:00 a.m.: Poland Dec. CPI
11:00 a.m.: Euro-area Nov. Industrial Production, Trade Balance
5:00 p.m.: Russia Dec. CPI
Czech Republic presidential elections first round voting starts

 

Corporate Events

Earnings include BNY Mellon, BofA, BlackRock, Citi, Delta, First Republic, JPMorgan, UnitedHealth, Wells Fargo

 

 

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