December 23, 2022

Daily Report 23/12/2022

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Following Wednesday’s government borrowing data, there were further concerns over the cost of government support programmes and upward pressure on the deficit. The wave of strike action was also a factor in curbing support. Although there was a lower current account deficit for the third quarter of 2022, the data was distorted by precious metals and there was little sign of underlying improvement with the deficit above 5.0% of GDP. In this context, markets fretted over further friction over EU trade.The wide deficits will maintain the UK requirement for capital inflows and the potential need for a very weak currency to attract inflows.

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The Euro held a firm tone after Thursday’s European open and attempted to move above a key level against the dollar. The Euro, however, was unable to extend the advance and gradually lost ground as caution prevailed in global markets. Weaker equities had a significant impact in curbing scope for further Euro gains as fragile risk appetite also supported the dollar. Higher energy prices also had some impact in undermining the Euro with markets still fretting over 2023 demand for gas within the Euro-zone.

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US initial jobless claims increased marginally to 216,000 in the latest week from a revised 214,000 previously and were again below consensus forecasts of 222,000. Continuing claims declined marginally to 1.67mn from 1.68mn and were marginally below market expectations. Third-quarter GDP was revised up to 3.2% from the previous estimate of 2.9% with a further limited upgrade of consumer spending.

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