IFX Market Report: Wednesday 8th March 2023

The UK Chancellor is set to deliver his Spring Budget on March 15, with mounting pressure to revive the country's economic fortunes after zero growth was recorded in the last quarter of 2022. The economy narrowly avoided a recession, but households and businesses still face major challenges, including double-digit inflation. Experts have warned that action must be taken to set the country on a path to economic growth and avoid a potential recession.

In the US, Federal Reserve Chairman Jay Powell has warned that bigger interest rate rises may be necessary to combat inflation. He noted that recent economic data was stronger than expected and that the ultimate level of interest rates is likely to be higher than previously anticipated. The announcement caused the dollar to strengthen across the board, with GBPUSD falling to 1.1830, the lowest since November 2022, and EURUSD falling to 1.0542, the lowest since December 2022.

Moody's Analytics Chief Economist Mark Zandi has also issued a warning, stating that the US economy could quickly shed a million jobs and fall into a recession if lawmakers fail to raise the nation's borrowing limit before the federal government exhausts its ability to pay its bills on time. If the debt limit is breached for a prolonged period, the damage could spiral to seven million jobs lost and a financial crisis similar to that seen in 2008. Zandi and his colleagues have prepared an analysis for the Senate Banking Committee's Subcommittee on Economic Policy.

These developments indicate a challenging economic environment ahead for both the UK and the US, with action needed to address inflation and debt concerns and stimulate growth. Investors should keep a close eye on the situation and consider adjusting their portfolios accordingly.

This morning Eurozone GDP numbers for Q4 came in at 0% which was in line with consensus, GBPEUR resides at 1.1222 Employment data in the US is being released at 1pm today with an increase on the previous month expected. The higher number can point towards increased consumer spending which will put pressure on inflation and point towards a need to hike interest rates.

Dato look out for later this week includes Jobless claims tomorrow from the US and UK GDP figures for January on Friday.

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