January 11, 2023

Daily Report 11/01/2023

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There were no significant UK developments on Tuesday with an underlying confidence in the outlook still a significant burden for the UK currency. The latest data on retail sales illustrated the pressures on spending and there were further concerns that the squeeze on consumer disposable income would intensify over the next few months. Risk conditions again had a significant impact, although overall volatility levels did tend to moderate during the day. Sterling dipped to lows against the dollar amid US currency gains, but there was support and a net recovery at the European close.

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The Euro was able to regain ground after a weakening of the Dollar yesterday afternoon. There were dovish members from ECB council member Centano who reiterated that the central bank is approaching the end of the interest rate process and this curbed the potential for a fresh Euro attack higher.

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The US NFIB small-business confidence index dipped to 89.8 for December from 91.9 which was below consensus forecasts of 91.5 and the lowest reading for six months. Although there were further concerns over inflation pressures, fewer companies reported that selling prices had increased and there was a slight easing of supply issues in the labour market, maintaining hopes that inflation would ease slightly. The IBD consumer confidence index edged lower to 42.3 for January from 42.9 previously, although this was slightly above consensus forecasts. Fed Chair Powell limited his comments to stating that the central bank needed to stick to its mandate and there were no direct comments on monetary policy. There had been some concerns that Powell would look to push back against market expectations and reiterate a hawkish policy stance. The lack of commentary helped underpin risk appetite and curbed dollar demand after the Wall Street open.

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