February 15, 2023

Daily Report 15/02/2023

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Sterling maintained a strong tone following the latest UK employment data with further speculation that the stronger growth in underlying wages would force the Bank of England to maintain a hawkish policy stance. Overall risk appetite also held firm ahead of the New York open with the FTSE 100 index testing fresh record highs. UK CPI inflation data recorded a larger than expected decline in the headline inflation rate to 10.1% from 10.5% and compared with expectations of 10.3%. The core rate also dipped to 5.8% from 6.3% and below expectations of 6.2%

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The Euro faced headwinds at the very start of the session, after the Eurozone’s latest retail sales data showed a huge 2.7% contraction in December – worse than was forecast. A 3.1% slump in German industrial production added to EUR’s woes on Tuesday, with the troubling data once again sparking fears of a recession in the Eurozone’s largest economy. A lull in economic data left the single currency vulnerable to further losses, while the Euro’s negative correlation with a recovering US Dollar (USD) added to the downside pressure.

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The dollar was unable to make any headway ahead of Tuesday’s New York open and the Euro posted net gains as equities made further headway. The US NFIB small-business confidence index edged higher to 90.3 for January from 89.8 previously, but fell short of expectations. US consumer prices increased 0.5% in January, in line with consensus forecasts, although the year-on-year inflation rate was held to 6.4% from 6.5% and above expectations of 6.2%. Food prices increased 0.5% on the month with a 6.4% annual increase while energy prices increased 2.0% to give an 8.7% annual increase. Core prices increased 0.4% for the month which was also in line with expectations with the annual increase at 5.6% from 5.7% and slightly above expectations of 5.5%. Used car prices declined for the seventh successive month with an 11.6% annual decline. There were, however, monthly increases of 0.8% and 0.7% respectively for apparel and shelter respectively which maintained some concerns surrounding underlying trends in the economy.

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