IFX Market Report: Friday 13th January 2023

The last few days saw little movement in the markets, as investors waited for the release of US inflation figures yesterday afternoon and GDP figures for the UK this morning.

The US CPI (inflation) data was key as it plays a large part in the decision to how the US FED control interest rates. Consumer prices fell for the first time in two and a half years driven by a fall in Petrol prices alongside other goods. The figures point to inflation being on a sustained downward trend, and analysts predict that there is only a 3.8% chance of a 50bps interest rate hike at the FEDS next meeting, down from 24% before the data release.

In other related news from the USD jobless claims came in positive, below expectations at 205k compared to expectations of 215k. However analysts will look at weakness in the labor market as a signal of slowing inflation.

Immediately after the CPI figures the dollar weakened across the board and GBPUSD touched a high of 1.2240, whilst EURUSD touched 1.0856 the highest since April 2022. The pair did fall back around 0.7% after the labor market numbers, but this was brushed off shortly after and saw the pair rebound close to the earlier highs.

This morning GDP figures for November showed an unexpected growth of 0.1% compared to the 0.2% contraction that was expected. The November number was said to be fueled by an increase in food and beverage purchasing, along with shopping for the run up to Christmas. Although the number was a positive in terms of avoiding ‘recession’, the 3 months leading to November recorded a 0.3% contraction leading analysts to predict that the growth in November is just prolonging the inevitable that the UK will enter recession in 2023.

Despite the GDP Growth both Industrial production figures and Manufacturing in the UK showed contraction in November, industrial was forecast at -0.3% but came in slightly better at -0.2% whilst Manufacturing came in worse at -0.5% compared to forecasts of 0.3%

Next week key data includes UK Employment numbers on Monday, UK inflation figures on Tuesday morning, US Retail Sales on Tuesday afternoon and UK Retail sales next Friday.

GBPUSD resides at 1.2235

GBPEUR resides at 1.1272

EURUSD resides at 1.0852

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