February 21, 2023

“Bearish pressure on EURUSD remains moderate. The Euro did not gain much support despite recent data from Germany showing private sector business activity expanded more significantly in early February than it did in January. On the other hand, Sterling has gained momentum in its recovery after UK data showed the private sector’s business activity sharply recovered in early February. Additionally, February PMI data for the US, as well as US Existing Home Sales, are scheduled to be released later today.”

Tim Hallinan – Trading Director

Main Headlines

In an unannounced visit to Ukraine, President Joe Biden met with President Volodymyr Zelenskyy to show his support for the country, which is still fighting a brutal and unjust war with Russia. Biden spent more than five hours in Ukraine, consulting with Zelenskyy, paying tribute to Ukraine’s fallen soldiers, and visiting US embassy staff. He spent about 23 hours in Ukraine, travelling by train from and back to Poland.

HSBC’s quarterly profit has nearly doubled, boosted by rising interest rates around the world. The London-based company reported a profit before tax of $5.2 billion (£4.3 billion) for the last three months of 2022, up more than 90% from the same period the previous year. However, pre-tax profit for the entire year fell by $1.4 billion to $17.5 billion as a result of the cost of selling its French retail banking operations. HSBC is also in the process of selling its Canadian operations.

GBP

Sterling is well bid against most major currencies overnight. The UK’s exporter-heavy FTSE 100 fell this morning, dragged down by HSBC, which dampened investors’ expectations of a sustained income bonanza from rising interest rates globally. The FTSE 100 index (.FTSE) fell 0.2%. Despite a surge in quarterly profit, HSBC fell 1.3% as Europe’s largest bank said it expects net interest income to be at least $36 billion in 2023, falling short of forecasts of $37 billion. The drop in HSBC stock dragged down the banking index (.FTNMX301010) by nearly 1%.

EUR

Euro is weaker than most major currencies in the early morning trade. Following warnings from Kiev that its forces urgently require more supplies, the European Union is urgently looking into ways for member states to buy munitions collectively to assist Ukraine. Yesterday, the EU’s foreign ministers met in Brussels to discuss the possibility of joint arms purchases. However, the EU’s top diplomat, Josep Borrell, warned that this would take time, even if Ukraine has urgent needs, and that collective procurement of supplies should be considered.

USD

The dollar is stronger against euro and weaker against sterling this morning. Prior to data this week that could provide guidance on future interest rates, the dollar traded near its highest level in six weeks, while the euro declined ahead of monthly business activity data. Solid US labour market statistics and persistent inflation have boosted US rate expectations and supported this month’s dollar surge; the next move will be determined by today’s European and US manufacturing data and Friday’s core PCE price index.

Markets

This morning, European markets declined as investors weighed corporate profits against the possibility that the US Federal Reserve will maintain its hawkish stance. Early trading saw the pan-European Stoxx 600 index down 0.8%, with the majority of sectors trading down. Financial services declined 1.2%, mining stocks down 1.3%, and IT companies sank 1.8%. The only area of growth was in utilities, up 0.3%. US futures stocks fell overnight as markets were ready to open again after the Presidents’ Day weekend.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Switzerland Jan. Exports
9:15 a.m.: France Feb. PMIs
9:30 a.m.: Germany Feb. PMIs
10:00 a.m.: Euro area Feb. PMIs
10:30 a.m.: UK Feb. PMIs
11:00 a.m.: Germany Feb. ZEW Survey
11:30 a.m.: Germany sells bonds
12:00 p.m.: Riksbank’s Ohlsson speaks
3:00 p.m.: Ukraine sells bonds
3:45 p.m.: US Feb. PMIs
4:00 p.m.: US Jan. Existing Home Sales

Corporate Events

Earnings include Engie, Walmart, Home Depot, Arconic, Molson Coors, Coinbase