Markets Report - 19 December 2022

A daily breakdown of the markets for the 19th December 2022, provided to you by Sterlex.

🇪🇺💶European Central Bank (ECB) policymaker Gediminas Simkus backs the case for a 50 basis points rate hike in February. He said that “there will undoubtedly be a 50 bps increase in February.” Kadri Simson, the European Commissioner for Energy, said in a statement on Monday, “I believe a deal on the gas price cap is within reach.” Meanwhile, European Council President noted that “I believe the gas price cap amount to be under €200. EUR/USD is clinging to recovery gains around the 1.0600 region, underpinned by the hawkish ECB policy outlook. The focus now shifts to the German IFO business survey for fresh trading impetus, in absence of top-tier US economic data releases this Monday.

🇬🇧💷GBP/USD pares the biggest weekly loss in six as it refreshes intraday high near 1.2200 during early Monday. British Pound pays a little heed to the headlines suggesting more pain for the UK’s economy, as well as political jitters surrounding the workers’ pay and the resulting walkouts. he UK economic challenges amid persistent strikes and recession fears limit the upside attempts in Cable. The BoE’s dovish rate hike also keeps GBP bulls cautious. Given the market’s consolidation of the recent moves, despite multiple negatives, the GBP/USD prices may witness further downside should the scheduled prints of the Q3 UK GDP offer a negative surprise. Furthermore, KPMG’s analysis, shared by The Times, suggests that the UK has already entered a “shallow and protracted recession” that will hit living standards and last until the end of next year, which could have weighed on the GBP/USD prices. “KPMG estimates that the economy entered a recession in the third quarter of this year and will contract by 1.3 percent next year owing to a sharp drop in consumer spending amid rising interest rates,” the news adds.

🇺🇸 🏦As the dust settled over the last week’s central banks’ policy announcements, risk sentiment remains in a weak spot at the start of a new week that will lead up to the Christmas holiday. Investors continue to assess the Fed’s hawkish outlook, which dents the appetite for riskier assets. US Dollar Index (DXY) drops to 104.70 as it pauses the two-day uptrend amid a sluggish start to the week. In doing so, the greenback’s gauge versus the six major currencies prints mild losses even as the US Federal Reserve (Fed) policymakers appear hawkish in their latest comments. The Fed tried to convince bulls of its hawkish capacity but lifting the dot-plot and showing readiness to keep the rates higher for longer in the last week. Even so, the 50 bps rate hike and an absence of any majorly positive comments from Fed Chair Jerome Powell favored the DXY bears on a weekly basis. It should be noted, however, that downbeat US PMIs and the Fed’s hesitance seem to tease the DXY bears ahead of the US central bank’s preferred inflation gauge, namely the US Core Personal Consumption Expenditures (PCE) - Price Index for November, up for publishing on Friday. Recently, the US S&P Global Manufacturing PMI dropped to 46.2 from 47.7 in November, as well as the market expectation of 47.7. Further, S&P Global Services PMI declined to 44.4 in December's flash estimate from 46.2 in November and market expectation of 46.8