January 04, 2023

Daily Report 04/01/2023

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Political jitters in the UK continued to weigh heavily on the Pound following the festive break. The Telegraph reported over the weekend that Prime Minister Rishi Sunak had shelved the childcare reform that was designed to help parents save money and return to work. Additionally, the first of five consecutive days of national rail strikes started yesterday. Sterling did manage to make a recovery throughout the afternoon session and overnight as the markets look to see where the British currency will be positioned for the year ahead.

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In the German money markets, the 10-year Bund yields regained some upside traction following two consecutive daily retracements. Headline inflation in Germany and the Euro area fell due to a decline in petrol prices and lower electricity inflation. It is expected that inflation should start to come down faster in 2023 due to base effects and government subsidies, such as the electricity and gas brakes in Germany.

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The US Dollar started the day on a firm footing with investors returning from the New Year holiday. The US Dollar Index, which lost nearly 1% in the last two trading days of 2022, rose decisively and advanced up 1.2% on a daily basis. According to the estimates, the ISM Manufacturing PMI is expected to deepen further to 48.5 from November’s release of 49.0. Shrinking manufacturing activities in the United States are expected to deliver signals of further downside in the inflation projections, which could compel the Federal Reserve to a slowdown in the policy tightening measures. However, investors will get more clarity on the monetary policy outlook through Federal Open Market Committee  minutes.

Key Data 

15.00 ISM Manufacturing PMI (Dec) Exp. 48.5 Prev. 49
19.00 FOMC Minutes