February 10, 2023

Daily Report 10/02/2023

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The UK’s economy flatlined in the last three months of 2022, helping it to avoid a recession by the thinnest of margins, new data showed. The Office for National Statistics recorded 0.0% growth in gross domestic product (GDP) in the fourth quarter. Anything below zero would have pushed the economy into recession. A recession is generally defined in the UK as two quarters of declining GDP in a row and the economy contracted 0.2% in the third quarter. Sterling held a firm tone in early Europe on Thursday with firm risk appetite helping to underpin the UK currency. Bank of England Governor Bailey retreated that the headline inflation rate is likely to decline sharply this year, but he also noted that the bank needed to see more evidence of inflation pressure easing. Chief economist Pill stated that the bank was seeing some signs of loosening in the labour market and he also noted that there is substantial further monetary tightening to come through as a result of lags in policy transmission. He did, however, add that there was no room for complacency.

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The German headline inflation rate edged higher to 8.7% from 8.6% the previous month, although this was below consensus forecasts of 8.9%. There was little impact on ECB expectations given that the Euro-Zone data had already been released. The Euro posted net gains into the New York open with increased optimism over the global growth outlook while gains in equities were significant in curbing defensive demand for the US dollar.

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US initial jobless claims increased to a 4-week high of 196,000 in the latest week from 183,000 previously and above consensus forecasts of 190,000 while continuing claims increased to 1.69mn from 1.65mn. The claims data triggered some speculation that the labour market was starting to cool, especially with evidence of increased layoffs. There was still significant caution ahead of next week’s consumer inflation data with concerns over a higher than expected core print.

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