Daily Market Update 07/02/2023

“The greenback remains relatively strong this morning, supported by a softer tone to risk appetite, while the Australian dollar has outperformed other currencies following the policy updates from the Reserve Bank of Australia. As anticipated, the RBA increased its main interest rate by 25 bps to 3.35%. Later today, remarks by Federal Reserve Chairman Jerome Powell and European Central Bank Board member Isabel Schnabel will be closely watched.”

Main Headlines

Goldman Sachs revised their outlook yesterday, estimating a 25% chance of a US recession in the next year, down from their prior forecast of 35%. This adjustment came after the latest US employment report was released on Friday, indicating a substantial increase in job growth in January and an unemployment rate that reached a new low of 3.4% -the lowest in over 53 years – highlighting a robust and competitive job market.

EU and UK negotiators have come to a compromise to minimize inspections on goods flowing between Great Britain and Northern Ireland, as part of their efforts to resolve the prolonged conflict surrounding the Northern Irish protocol. Under the new agreement, goods from Great Britain headed for Northern Ireland will be subject to reduced checks through a designated “green lane,” but the specific requirements for customs documentation and food and animal health inspections have yet to be determined.

Markets

The pan-European Stoxx 600 was up 0.3% in early trade, with sectors and major bourses a mixture of gains and losses. Oil and gas led gains, up 1.6%, while tech stocks dropped 0.4%. US stock futures rose slightly early this morning as investors braced themselves for the latest commentary due today from Federal Reserve Chairman Jerome Powell.

GBP

Sterling is well bid against most major currencies overnight. A top official at the Bank of England has cautioned that the central bank may be required to continue raising interest rates in order to avoid inflation from becoming a persistent issue in the economy. Catherine Mann, an independent economist at the bank’s Monetary Policy Committee (MPC), said inflation remained higher than expected due to the impact of the coronavirus pandemic, Russia’s war in Ukraine and Brexit.

EUR

Euro is weaker than most major currencies in the early morning trade. This morning, a nationwide strike against planned pension reforms disrupted petrol deliveries from French refineries. Since mid-January, unions have been on strike to protest the government’s plans to make people work longer before retiring. Schools and public transportation have also been impacted. According to data from power utility EDF (EDF.PA), total power supply was reduced by about 4%, due to reduced supply at two nuclear reactors and several thermal plants.

USD

The dollar is stronger against euro and weaker against sterling this morning. The main US stock indexes fell yesterday as investors shifted gears after considering the possibility that the US Federal Reserve may take longer to start cutting rates. Traders are keeping a close eye on speeches by Fed officials this week, including Chair Jerome Powell today, for any change in the central bank’s dovish rhetoric after data last week showed services activity was strong in January as well as strong job growth.

Ballinger & Co. Market Analysis– 07th February 2023

Today’s Market Rates

Today’s Interbank Rates at 09:34 am against sterling movement.

GBP>EUR – 1.1216

GBP>USD – 1.2023

EUR>USD – 1.0724

GBP>CAD – 1.6124

GBP>AUD – 1.7327

GBP>SEK – 12.762

GBP>AED – 4.4161

GBP>HKD – 9.4360

GBP>ZAR – 21.188

GBP>CHF – 1.1126

Today’s Highlights

·        7:45 a.m.: Switzerland Jan. Unemployment

·        8:00 a.m.: Germany Dec. Industrial Production

·        8:00 a.m.: Norway Dec. Industrial Production

·        8:00 a.m.: Sweden Jan. Budget Balance

·        8:45 a.m.: France Dec. Trade Balance

·        9:00 a.m.: Spain Dec. Industrial Production

·        9:00 a.m.: Switzerland Jan. Foreign Currency Reserves

·        9:00 a.m.: ECB’s Kazimir speaks.

·        9:10 a.m.: ECB’s Knot speaks.

·        10:00 a.m.: BOE’s Ramsden speaks.

·        11:00 a.m.: UK to sell bonds.

·        11:00 a.m.: ECB’s Villeroy speaks.

·        11:15 a.m.: BOE’s Pill speaks.

·        4:00 p.m.: BOE’s Cunliffe speaks.

·        6:00 p.m.: ECB’s Schnabel speaks.

·        Fed’s Powell speaks.

·        Biden delivers State of the Union address.

·        Ukraine Jan. Official Reserve Assets

·        Bank of Italy Reports on Balance-Sheet Aggregates

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This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited/Manor House Foreign eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result. Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.

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