IFX Market Report: Tuesday 24th January 2023

This morning UK Government borrowing rose to the highest December number on record at £27.4bn as debt interest jumped to £17.3bn. The high numbers mean that any chance of big budget giveaways look slim. The pound fell back after the data falling close to 1.23 after spending the majority of the morning close to 1.24.

UK PMI also fell to 47.8 in January a 24 month low, any reading below 50 shows a contraction. The fall was down to services sector activity and manufacturing production which has decreased considerably, however the rate it has contracted is the slowest since July 2022.

The Eurozone looks a little more optimistic as Global PMI rose to 50.2 which is a 7 month high, and was down to the Services sector moving back to growth at 50.7. Manufacturing activity was still on the decline but at a reduced pace. However there is still pressure on the goods and services market, as rates of inflation rose in both manufacturing and services.

The Euro showed strength against the Dollar and pound hitting 1.0911 the highest since April 2022, it also made some headway against the pound pulling back from 1.14 down to 1.1330.

The US Dollar was the dominant force in 2022 as global uncertainty crept in after the war in Ukraine started and the cost of products particularly energy rose considerably. The US were expected to lead the way in regards to interest rate hikes, however inflation appears to have tapered therefore the need to hike rates has been reduced considerably. Fed policymakers now believe that there will be two 0.25 increases in Q1, then a pause on rate hikes for the remainder of 2023.

Data to look out for this week includes UK Producer Price index tomorrow morning which is expected to show a increase in December. Then Thursday at 13.30 UK time will have US GDP final figures for Q4 2022 as well as Jobless claims up to January 20th.

GBPUSD currently resides at 1.2321

GBPEUR currently resides at 1.1332

EURUSD currently resides at 1.0869

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