Key Points
Focus is on US and UK inflation data due start of the week.
A quiet week expected for EU data releases.
UK economy narrowly avoided a recession.
Market Update
GBP
Sterling traded broadly unchanged against the greenback last week, with the most of the FX market taking something of a ‘pause for breath’ after the central bank bonanza which began the month, and ahead of this week’s eagerly-anticipated US inflation figures.
Nevertheless, one must judge the bears to be in control at the moment, with the quid having now spent an entire week stuck beneath the 50-day moving average, and perilously close to a break below the 1.20 handle.
Looking ahead, domestic events will be the focus this week, with the latest employment (Tues), inflation (Weds), and retail sales (Fri) reports all due, as markets continue to try and gauge how close the BoE are to concluding the tightening cycle.
EUR
Though the ECB remain hawkish, and plenty of remarks to that end were delivered last week, the common currency has struggled to catch a bid, last week notching back-to-back weekly losses for the first time since last September.
It would appear that the rally since Q4 last year has rather run out of steam, with the ‘peak pessimism’ narrative having now been priced out, the ECB outlook accurately discounted, and the EUR subsequently lacking in upside catalysts.
This week, the eurozone calendar is again quiet, besides revised GDP figures, leaving the EUR again set to be driven by external developments.
USD
The blowout NFP and ISM PMI prints appear to have marked a turning point for the buck, with dollar bulls having decisively wrestled back control, culminating with the DXY closing above the 50-day moving average on Friday, for the first time since last November.
Markets are now taking the FOMC’s ‘higher for longer’ rhetoric, of which we were served another repetition last week, much more seriously, as incoming data supports the idea of a ‘soft landing’ for the economy.
Looking ahead, Tuesday’s CPI figures are by far this week’s most important event, with a hotter than expected figure – as surveys indicate is likely – set to further embolden dollar bulls; retail sales, PPI, and jobless claims figures are also all due during the week ahead.
World News
The UK economy narrowly avoided recession in the second half of 2022, despite negative growth in December following increased strike action across several sectors, including Royal Mail and Train workers, and a pause in Premier League football, alongside England being knocked out of the World Cup, reducing spending in the hospitality sector. The ONS reported output was flat at 0% for the last quarter of 2022, however across the whole year, the economy grew by 4%.
The US military have shot down its fourth unidentified and suspicious flying objects in just over a week, over concerns that it could endanger civilian plane flightpaths. The objects have yet to be identified, however US officials are not ruling anything out whilst the investigation is taken. The US military are gathering the remains of each object to understand what it is over fears that they could be Chinese spy objects travelling in US air space.
Data Releases
| Date | Region | Release | Previous | Consensus |
| Tuesday 14th February | UK | Claimant Count Change | 19.7k | 17.9k |
| Tuesday 14th February | UK | Average Earnings Index | 6.40% | 6.20% |
| Tuesday 14th February | US | CPI m/m | -0.10% | 0.50% |
| Wednesday 15th February | UK | CPI y/y | 10.50% | 10.30% |
| Wednesday 15th February | US | Retail Sales m/m | -1.10% | 1.70% |
Indices
| Share Index | Prev. Close | Open |
| FTSE100 | 7882.45 | 7882.45 |
| DAX | 15307.98 | 15322.06 |
| CAC40 | 7129.73 | 7147.48 |