January 5, 2023

“The greenback held steady in choppy trading this morning after the release of the latest Federal Reserve minutes – policymakers remain focused on curbing inflation and do not expect interest rate cuts in the new year.”

Tim Hallinan – Trading Director

Main Headlines

Inflation in the US has not “turned the corner yet” and it is too early for the Federal Reserve to declare victory in its fight against soaring prices, a top IMF official has warned. Gita Gopinath urged the US central bank to press ahead with rate rises this year despite a recent moderation in headline inflation following one of the most aggressive tightening campaigns in the Fed’s history. The comments come after a flurry of data suggested inflation in the US, Europe and other economies might have peaked, as energy prices fall from recent highs and the cost of goods such as home appliances and used cars starts to decline.

The recovery in activity in London’s offices and hotels after the pandemic lockdowns lagged behind many rival European cities in 2022. Offices and hotels in Amsterdam showed the largest increases in elevator usage last year. London offices were ranked fifth in terms of how much the use of lifts rose during the year, and its hotels came tenth. Data on elevator journeys are used as a proxy of activity levels in commercial buildings such as offices and hotels. The figures will add to worries among some policymakers and landlords over the slow return of workers to British companies’ offices.

GBP

Sterling is weaker than most major currencies in the early morning trade. PPE Medpro tried to sell the UK medical equipment with a safety report purportedly provided by a company that has denied authoring the document, the government has alleged in a £133mn lawsuit against the scandal-riven medical supplies group. Rishi Sunak yesterday outlined five key promises for the next general election, including expanding the UK economy and cutting NHS waiting lists, as he squared up to the Labour party at the start of a pivotal year in British politics.

EUR

Euro is well bid against most major currencies this morning. Germany’s health minister has expressed concern over a new COVID-19 subvariant linked to growing hospitalisations in the north-eastern United States, adding that Berlin was watching the situation closely. European Union government officials recommended on Wednesday that passengers flying from China to the EU should have a negative COVID-19 test before they board, as Beijing plans to ease travel restrictions despite a wave of new COVID infections.

USD

The dollar is stronger against sterling and weaker against euro this morning. The US House of Representatives has failed for a second day to select a new Speaker, after California congressman Kevin McCarthy suffered a humiliating setback in fresh rounds of voting amid sustained opposition from an intransigent group of Republican party rebels. Federal Reserve officials warned they would need to see “substantially more evidence” of easing inflation before they are convinced that price pressures are under control as they backed fresh rate rises this year.

Markets

European stocks and US equity futures slipped as investors balanced further signs of China’s reopening with cautious commentary from the Federal Reserve’s latest meeting. The Stoxx Europe 600 Index fell 0.3% in early trading, with consumer products stocks leading declines. Contracts on the S&P 500 and the Nasdaq 100 were about 0.3% lower. Chinese mainland and Hong Kong equity gauges rose in a rally helped along by news the border with China will gradually reopen. The Hang Seng Index climbed to the highest level since July and a gauge of Asian equities advanced.

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

8:00 a.m.: Germany Nov. Imports, Exports
9:00 a.m.: Austria Dec. CPI
9:30 a.m.: Germany Dec. S&P Global Construction PMI
10:00 a.m.: Norway’s PM Store Meets Germany’s Habeck in Oslo
10:00 a.m.: Poland Dec. CPI
10:30 a.m.: UK Dec. S&P Global/CIPS Services, Composite PMIs
10:30 a.m.: BOE decision maker panel survey
10:50 a.m.: France to sell bonds
11:00 a.m.: Euro-area Nov. PPI
11:00 a.m.: Italy Dec. CPI
12:30 p.m.: UK to sell bonds
1:30 p.m.: Fed’s Harker speaks
2:00 p.m.: National Bank of Poland minutes
3:20 p.m.: Fed’s Bostic speaks
3:00 p.m.: Polish Central Bank Governor Glapinski’s news conference
5:00 p.m.: EIA US crude oil inventories
7:20 p.m.: Fed’s Bullard speaks

Corporate Events

Earnings include Walgreens Boots, Constellation Brands, Conagra