Markets Report - 06 February2023

A daily breakdown of the markets for the 6th February 2023, provided to you by Sterlex.

🇪🇺💶Data wise in the euro area, Factory Orders in Germany expanded more than expected 3.2% MoM in December, while the Construction PMI improved to 43.3 in January and New Car Registrations contracted 2.6% over the last twelve months. In the broader Euroland, the Construction PMI rose to 46.1 during last month, Focus will now turn to ECBs Largade speech after her hawkish comments last Thursday prevail. It seems clear that ECB will hike far more than the US, as they dismiss peak rates by H1 this year, and “In all reasonable scenarios, significant hikes needed”. Wouldn’t say that disinflationary process is already at play”.

🇬🇧💷A dovish assessment of the Bank of England (BoE) decision last week is also seen keeping a lid on the British Pound. The BoE, in its monetary policy statement, removed the phrase that they would "respond forcefully, as necessary". Furthermore, BoE Governor Andrew Bailey said that inflation will continue to fall this year and more rapidly during the second half of 2023. On the economic data front, the UK Construction PMI remains in contraction territory for the second straight month and came in at 48.4 for January, down 48.8 previous. ING stated “We expect the British economy to have narrowly avoided a technical recession in the fourth quarter. Still, a 1Q23-2Q23 recession is more than possible, although that could be milder than previously expected thanks to lower energy prices.” Bank of England (BoE) policymaker Catherine Mann said in a scheduled appearance on Monday that in my view the next step in the bank rate is that it is more likely to be another hike.

🇺🇸 🏦The US Dollar Index (DXY) holds at fresh multi-week highs near 103.00 and the benchmark 10-year US Treasury bond yield stays in positive territory at around 3.55%. There won't be any high-tier data releases from the US and market participants will pay close attention to Fedspeak. The data published by the US Bureau of Labor Statistics revealed on Friday that Nonfarm Payrolls (NFP) in the US rose by 571,000 in January, surpassing the market expectation of 185,000 by a wide margin. Although the annual wage inflation, as measured by the Average Hourly Earnings, declined to 4.4% in January, December's reading of 4.6% got revised higher to 4.9%. The US Dollar surged higher on the impressive NFP reading and the DXY snapped a three-week losing streak, gaining 1% on a weekly basis. Sentix Investor Confidence Index for February and January Retail Sales will be featured in the European economic docket on Monday. Markets have started the new week in a calm manner and the US Dollar manages to stay resilient against its major rivals after having registered impressive gains on the back of the impressive January jobs report on Friday.