February 01, 2023

Daily Report 01/02/2023

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The latest UK data recorded a further sharp decline in mortgage approvals to 35,600 for December from 46,200 the previous month and well below consensus forecasts of 45,000. Excluding the immediate pandemic period in 2020, this was the lowest level since the beginning of 2009. There was a much smaller increase in consumer credit which could indicate weak spending or that distressed borrowing was lower than feared ahead of Christmas. According to the latest YouGov survey the 1-year inflation expectations index declined to 5.4% from 5.7%. The long-term expectations also edged lower to 3.5% from 3.6%. Media reports that agreement had been reached with the EU on the Northern Ireland protocol had little impact amid uncertainty surrounding the Bank of England policy decision and expectations of a hawkish ECB stance.

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German retail sales slumped 5.3% for December compared with expectations of a small increase which sapped confidence in the outlook and the Euro dipped lower after the European open. The latest labour-market data recorded a further 15,000 decline in German employment for January after a 13,000 decline previously and compared with expectations of a small monthly increase which countered concerns. The Euro-Zone recorded a 0.1% GDP increase for the fourth quarter of 2022 compared with expectations of a 0.1% decline. There was, however, a slowdown in annual growth to 1.9% from 2.3%. Although the GDP data was better than expected, the Euro was unable to gain further support. The latest Euro-Zone inflation data will be released on Wednesday.

Key Data 

10.00 Core Harmonised Index of Consumer Prices (YoY) (Jan) Exp. 5.1% Prev. 5.2%
10.00 Harmonised Index of Consumer Prices (YoY) (Jan) Exp. 9% Prev. 9.2%

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US consumer confidence declined to 107.1 for January from an upwardly revised 109.0 the previous month and below expectations of 109.0. Although there was a net improvement in the current conditions index, this was offset by a dip in expectations with consumers also less confident over the labour-market outlook. The dollar dipped significantly after the US open with the Euro recovering with some protection from expectations of a hawkish ECB stance. The Federal Reserve will release the latest policy statement on Wednesday with strong expectations that the central bank will slow the pace of rate hikes to 25 basis points which will take the Fed Funds rate to 4.75%. Forward guidance from the bank and rhetoric from Chair Powell will be a crucial element for all asset prices including currencies.

Key Data

13.15 ADP Employment Change (Jan) Exp. 178K Prev. 235K
15.00 ISM Manufacturing PMI (Jan) Exp. 48 Prev. 48.4
19.00 Fed Interest rate Decision Exp. 4.75% Prev. 4.5%
19.00 Fed Monetary Policy Statement
19.30 FOMC Press Conference