January 27, 2023

“The dollar pulled away from a near nine-month low against the euro and a seven-month low against sterling this morning, as traders gear up for a crucial week where all three central banks will meet. The focus today will be on the Federal Reserve’s preferred inflation gauge, the PCE data which is widely expected to rise 0.3% in December.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Joe Biden has extended a programme that allows Hong Kong citizens facing potential political repression from China to remain in the US following pressure from progressive lawmakers and human rights groups. Biden declared that Hong Kong citizens residing in the US could remain in the country for two more years as he extended the Deferred Enforced Departure programme. The US president took the move, ahead of the programme expiring on February 5, because China had “continued to erode” the human rights and freedoms of Hong Kong residents.

An increasing number of small British businesses are holding back their growth to avoid meeting the value added tax threshold, adding pressure on the government to review its policy around the UK’s third most lucrative tax. Thousands of businesses are keeping their annual revenues below £85,000 to avoid having to register for or charge VAT, according to data obtained from HM Revenue & Customs. Data showed that the number of companies with revenue leading up to the threshold limit in 2018-19 was significantly higher than four years previously, and fell more dramatically after it had been breached.

GBP

Sterling is weaker than most major currencies in the early morning trade. Jeremy Hunt will promise today to tackle the country’s weak productivity with post-Brexit finance reforms to boost growth. Small businesses have warned that UK government plans to slash energy subsidies will cause them acute pain, and claimed that mistreatment from energy suppliers has left them exposed to higher costs. Soaring growth in the cost of rents in Britain is expected to cool as an increase in the number of homes on the market helped to cool competition between tenants in late 2022.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. Hungary’s Prime Minister, Viktor Orban, said the country will veto any European Union sanctions against Russia affecting nuclear energy. Plans by the European Commission to create new European Union funding for the green industry are facing mounting opposition in the 27-nation bloc, as seven EU countries openly rejected the idea in a letter to the EU executive. European Union ministers seek ways to curb irregular immigration and send more people away as arrivals rose from pandemic lows.

USD

The dollar is well bid against most major currencies this morning. In a quarterly report on large-scale renewable energy power purchase agreements (PPA), energy advisory Edison Energy said prices in the US market continue to rise, albeit at a slower pace than experienced since the second quarter of 2021.US lawmakers pressed the acting head of the Federal Aviation Administration on steps the agency was taking to ensure there would be no repeat of a pilot messaging database failure that led to the first nationwide ground stop since 2001.

Markets

Global equity momentum fizzled on Friday, with European stocks opening near flat and US futures in the red after a grim quarterly forecast from chipmaker Intel Corp. dampened some of the market optimism stemming from better-than-expected US economic data and bullish bets on China. Europe’s equity benchmark, the Stoxx 600, failed to build on its 0.4% gain from Thursday, while US equity futures shed around 0.3% after a strong session amid disappointment over Intel giving one of the gloomiest quarterly forecasts in its history.

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

8:00 a.m.: Sweden Dec. Unemployment
8:45 a.m.: France Jan. Consumer Confidence
9:00 a.m.: Spain 4Q GDP
10:00 a.m.: Euro-Area Dec. M3 Money Supply
2:30 p.m.: US Dec. Personal Income, Spending, PCE Core Deflator
4:00 p.m.: US Jan. U. of Michigan Sentiment, Dec. Pending Home Sales

Corporate Events

Earnings include Chevron, AmEx, H&M, Colgate-Palmolive, HCA Healthcare, Roper

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