January 30, 2024

“The economic diary opens up today with a raft of eurozone GDP data and the JOLTS survey in the US. We should see some contrasting outlooks today from the confirmation of a German recession versus booming consumer confidence in the US, something which has pushed the euro downwards throughout this month.”

Sam Cornford – Head of Trading

Main Headlines

Farmers in France staged protests by blocking highways with long lines of tractors near Paris and in various parts of the country, expressing their anger and calling on the government to provide more assistance in coping with inflation and competing against cheap imports. This comes after similar protests that have occurred in Germany and Poland, with Belgium set to join, ahead of the European Parliament elections in June. The farmers have stated that they will continue to block roads for as long as necessary.

The Bank of England’s Prudential Regulation Authority (PRA) has imposed a fine of £57.4 million on HSBC for ‘serious failings’ related to the protection of certain customer depositors over multiple years. The PRA stated that HSBC failed to accurately identify deposits eligible for the Financial Services Compensation Scheme (FSCS), which safeguards customer cash up to £85,000. The FSCS compensation relies on banks ensuring accurate information is maintained for customers.

GBP

Sterling has fluctuated within a tight trading range early this week as markets await the Fed and BoE decisions for new directional clues. British BRC retail price growth this morning fell from 4.3% in December to 2.9% in a positive indicator for Bank of England policymakers ahead of the press conference on Thursday. With a June first cut currently expected, the language accompanying the decision remains the biggest focus for sterling investors. Until then, they will have a couple of data points to chew on this morning with mortgage and consumer lending releases, although it is likely that the pound will stick to its current levels until it finds a stronger impulse with the key risk events coming up.

EUR

The euro has struggled to draw strength from some better-than-expected data this morning. The French economy narrowly avoided a technical recession in the fourth quarter with a 0.0% change in GDP, whilst Spanish flash CPI unexpectedly ticked up to 3.4%. As largely expected, German technical recession was confirmed this morning with a worsening 0.3% contraction in Q4, dragging on the figure for the eurozone economy as a whole an hour later. The still-grim outlook is unlikely to boost the investment case for the euro, and more dovish commentary from ECB officials at the weekend continues to guide eurozone yields and the euro lower. Bets that the first cut will come in April are inching ever higher, briefly dropping the euro to a six-week low in yesterday’s session.

USD

The drifting dollar index awaits steer from labour data and the Fed as it remains around its highest valuation since mid-December. The corrective moves to the aggressive rate cut bets from Q4 that have powered the dollar’s new year rally has eased over the past week. Falling US yields have capped further bullish momentum this morning, given news that the US Treasury now expects $55bn lower in Q1 net borrowing – lower supply tends to increase bond prices and reduce their yields as a result. Strong economic data this month should drive consumer confidence higher again this afternoon, whilst the JOLTS Job Openings should ease only modestly from 8.79M to 8.73M as the US labour market remains tight. Fed officials will undoubtedly look closely at these final figures ahead of their decision tomorrow.

Markets

Falling US yields pushed the S&P 500 to a fresh record close yesterday as stocks in Asia slipped this morning on deepening market pessimism following the forced liquidation of Evergrande and the potentially tighter security laws in Hong Kong. Oil remains above $80 a barrel amid mounting geopolitical concerns, but this has had little effect on market expectations for eurozone inflation.

Main Economic Events (All Times CET)

7:30am: French Flash GDP and Consumer Spending
9:00am: Spanish Flash CPI and Flash GDP
10:00am: Italian and German Prelim GDP
10:30am: UK Net Consumer Lending
11:00am: Eurozone Flash GDP
4:00pm: US JOLTS Job Openings and CB Consumer Confidence

Corporate Events

Earnings include Microsoft, AMD, Pfizer, UPS, Mondelez

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