Markets Report - 17 January 2023

A daily breakdown of the markets for the 17th January 2023, provided to you by Sterlex.

🇪🇺💶European Central Bank (ECB) board member and Bank of Portugal Governor Mario Centeno said on Tuesday, “the fourth quarter growth in Europe will be most likely still positive.” Data wise in the region, all the attention is expected to be on the Economic Sentiment print of both Germany and the Euroland ahead of the ECOFIN Meeting. Earlier in the session, final inflation figures in Germany saw the CPI contract 0.8% MoM in December and rise 8.6% over the last twelve months. Back to the euro area, the increasing speculation of a potential recession in the bloc emerges as an important domestic headwind facing the euro in the short-term horizon. EUR/USD appears so far well underpinned by the 1.0800 neighbourhood amidst some renewed weakness and inconclusive trends in the risk appetite.

🇬🇧💷The UK Average Hourly Earnings rises to 6.4% in November vs 6.3% expectations. Commenting on the UK’s labor market statistics on Tuesday, British Finance Minister Jeremy Hunt said that “we must not do anything that risks permanently embedding high prices into our economy, which will only prolong the pain for everyone.” GBP/USD is rising back above 1.2200, underpinned by the beat in the UK earning growth, which raised the probability of a 50 basis points (bps) Bank of England (BoE) rate hike to 74%. Attention now turns toward Wednesday’s UK Consumer Price Index data due at 07:00 GMT for fresh cues on the BoE’s policy path for 2023.

🇺🇸 🏦US Dollar Index (DXY) fails to extend the week-start recovery moves, easing back to 102.30 during the early hours of Tuesday, as full markets probe US Treasury bond sellers amid easing fears of high inflation and concerns surrounding the US “soft landing”. It’s worth noting that the two-year US bond coupons remain indecisive at around 4.25% by the press time. Also challenging the US Dollar Index recovery could be the cautious mood ahead of China's Gross Domestic Product (GDP) for the fourth quarter (Q4) and the US Retail Sales for December, up for publishing on Tuesday and Wednesday respectively. That said, the benchmark US 10-year Treasury bond yields seesaw around 3.525% after extending the bounce off the one-month low the previous day. It’s worth noting that the equities in Europe and the UK managed to close with mild gains on Monday, which in turn probe DXY bulls. Amid these plays, S&P 500 Futures retreat from a one-month high, down 0.20% intraday near 4,009 at the latest.