March 24, 2023

Daily Report 24/03/2023

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The Bank of England increased interest rates by 25 basis points to 4.25% which was in line with consensus forecasts following higher than expected inflation data reported on Wednesday. There was a 7-2 vote for the decision with Tenreyro and Dhingra again calling for rates to be left on hold. The bank upgraded its outlook for second-quarter GDP with the bank no longer forecasting a contraction and limited growth likely. The bank still warned over underlying inflation pressures with the labour market still tight. There was only limited forward guidance with the bank stating that it would raise rates further if needed.

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Euro-Zone consumer confidence was little changed at -19.2 for March from a revised -19.3 the previous month which maintained reservations over potential spending trends, although financial-sector trends tended to dominate during the day.
Overall, the Euro consolidated just below the 1.0900 level into the European close and then lost ground later in the session and retreated to around 1.0830 as equities lost traction amid further concerns surrounding the banking sector. The latest PMI US and Euro-Zone business confidence data on Friday will be important for market expectations surrounding major economies. There will be further concerns surrounding the banking sector and the Euro was held around 1.0830 in early Europe.

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US initial jobless claims were little changed at 191,000 in the latest week and slightly below consensus forecasts of 197,000 while continuing claims edged higher to 1.69mn from 1.68mn previously. The data did not suggest significant changes in labour-market conditions.Overall dollar sentiment remained weaker following Wednesday’s Federal Reserve policy meeting with further expectations that peak rates would be lower than expected previously. Powell’s caution over credit condition was also an important factor maintaining unease over the US outlook.

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