Markets Report - 13 February2023

A daily breakdown of the markets for the 13th February 2023, provided to you by Sterlex.

🇪🇺💶In its quarterly publication released on Monday, the European Commission revised upwards its economic growth forecast for the Eurozone to 0.9% in 2023 from 0.3% previously, projecting 2024 growth unchanged at 1.5%. EU Commission lowers its Eurozone inflation forecast for 2023 to 5.6% YoY from 6.1% expected earlier, sees inflation of 2.5% in 2024, down from the previous forecast of 2.6%. European Central Bank (ECB) policymaker Mario Centeno made some comments on the inflation and monetary policy outlook, in his speech on Monday. Inflation is going down faster than we expected. The latest ECB commentary is having little to no impact on the EUR/USD pair, as it keeps its downside consolidative phase intact at around 1.0675.

Key quotes:

- Smaller hikes would need mid-term inflation nearing 2%.

- March forecasts will help determine peak rate.

- Forecasts are likely to show a faster drop in inflation.

- Economy and labor market are showing resilience.

🇬🇧💷The GBP/USD pair edges lower for the second straight day on Monday and remains on the defensive through the first half of the European session. The focus will then shift to the UK CPI report, along with the US Retail Sales data, on Wednesday and the US Producer Price Index (PPI) on Thursday. Moreover, the UK central bank, in its monetary policy statement, removed the phrase that they would "respond forcefully, as necessary". The pair is currently placed near the mid-1.2000s, just a few pips above the daily low, and seems vulnerable to extending last week's retracement slide from the vicinity of the 1.2200 mark. The UK monthly jobs report is due on Tuesday, which will be followed by the US CPI report. It is worth recalling that BoE said that inflation will fall more rapidly during the second half of 2023. The Bank of England (BoE) is becoming increasingly unsure as to whether further policy tightening is warranted.

🇺🇸 🏦On Friday, the data published by the University of Michigan revealed that the year-ahead inflation expectation component of the Consumer Sentiment Survey rose to 4.2% in early February from 3.9% in January. In the European morning, DXY clings to small daily gains near 103.70 and the benchmark 10-year US Treasury bond yield holds steady above 3.7%. However, the greenback could see some selling pressure following the release. This data helped the US Dollar preserve its strength against its rivals late Friday and the US Dollar Index (DXY) closed the second straight week in positive territory. Economists at ANZ Bank expect the US Dollar to remain resilient ahead of the US Consumer Price Index (CPI) report tomorrow. Reflecting the cautious mood, US stock index futures are down between 0.25% and 0.35%. Economists at ING expect DXY to return to the 105 level soon. US Dollar Index (DXY) clings to small daily gains.