Markets Report - 01 March 2023

A daily breakdown of the markets for the 1st March 2023, provided to you by Sterlex.

🇪🇺💶Hawkish ECB expectations drive the Euro through the roof. European Central Bank (ECB) policymaker Joachim Nagel reiterated on Wednesday that further significant rate hikes beyond March may be needed, as reported by Reuters. EUR/USD holds the latest upside near 1.0660, adding 0.84% on the day. German inflation data is next in focus. Expect growth in France to be slightly positive in 2023, slightly higher than the +0.3% forecast in December - before the expected recovery in 2024.

🇬🇧💷The British Retail Consortium’s measure of UK shop price inflation hit 8.4% YoY in February, the largest increase since at least 2005, as the cost of living crisis showed little sign of abating. The BRC reported that food prices rose 14.5% over the same period (FT). Adding to this, rising bets for additional rate hikes by the Bank of England (BoE) lend some support to the GBP/USD pair. Bank of England Governor Andrew Bailey said on Wednesday that some further increase in bank rate may turn out to be appropriate but added that nothing is decided, as reported by Reuters. The British Pound, draws additional support from the new UK-EU agreement on the Northern Ireland protocol, which eliminates the risk of a potential trade war between the two sides. Some analysts, however, still hope that the UK central bank would pause the current tightening cycle.

🇺🇸 🏦The US central bank is universally expected to stick to its hawkish stance for longer and continue hiking interest rates in the wake of stubbornly high inflation. The broad USD index has fallen around 0.4% overnight following the data, which set the tone for risk appetite during the Asia session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the major. Traders now look forward to the release of the US ISM Manufacturing PMI.