January 05, 2023

Daily Report 05/01/2023

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A monthly survey conducted by Citi and YouGov revealed on Wednesday that the British public’s inflation expectations for 12 months ahead declined to 5.7% in December from 6.1% in the previous survey. This is going to provide support to the Bank of England which is worried about roaring inflation. Prime Minister Rishi Sunak delivered a speech yesterday in which he outlined is plans for the next 12 months. He said he wants to halve inflation, grow the economy and reduce national debt.
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Eurozone investors are awaiting the release of the Harmonized Index of Consumer Prices, which is scheduled tomorrow. As per the consensus, the headline HICP is likely to drop to 9.7% vs. the prior release of 10.1%. This week, German HICP dropped to 9.7% led by falling energy prices. A decline in the price index might force the European Central Bank to slowdown their policy tightening pace as the road to 2% inflation is far from over.

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On Wednesday, the US ISM Manufacturing PMI declined to 48.4 vs. the consensus of 48.5 and the former release of 49.0. A consecutive shrink in the extent of manufacturing activities is the outcome of higher interest rates by the Fed, which has forced firms to avoid debts due to higher interest obligations. Apart from that, New Order Index that indicates forward demand has dropped dramatically to 45.2. Fed chair Jerome Powell in a December policy meeting announced that interest rates will top above 5% and higher interest rates will be continued for a longer period to tame stubborn inflation. The release of the Federal Open Market Committee minutes indicates that Fed policymakers have cheered inflation softening but require more evidence to confirm the downward path. The US Dollar Index continued to remain rangebound around 104.20. S&P500 futures are displaying marginal gains after a sell-off on Tuesday. The 10-year US Treasury yields have dropped further to 3.73%.

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13.15 ADP Employment Change (Dec) Exp. 150K Prev. 127K