January 20, 2023

“Cable is trending lower after this morning’s gloomy UK Retail Sales data, which slumped to -1.0 per cent in December in contrast to 0.5% anticipated. UK Consumer Confidence also declined to -45 in January. Additionally, the dollar has strengthened, supported by hawkish comments from Fed officials. Later today, remarks from ECB’s President Lagarde will be closely watched.”

Tim Hallinan – Trading Director

Main Headlines

The US hit the debt ceiling set by Congress yesterday, forcing the Treasury Department to start taking extraordinary measures to keep the government paying its bills and escalating pressure on Capitol Hill to avoid a catastrophic default. The battle lines for the high-stakes fight have already been set. Hardline Republicans, who have enormous sway in the House because of the party’s slim majority, have demanded that lifting the borrowing cap be tied to spending reductions. The White House countered that it will not offer any concessions or negotiate on raising the debt ceiling.

Ambulance workers have announced a series of fresh strikes including one next month that was already predicted to be the biggest day of stoppages in NHS history. All the new dates announced by the Unite union in England, Wales and Northern Ireland will coincide with strikes already outlined by the GMB union, which also represents ambulance staff. They include 6 February, when up to 40,000 nurses from the Royal College of Nursing will also be on strike in what is set to be a day of massive disruption for the health service. There are fears services could grind to a halt with non-urgent operations cancelled to help emergency departments cope with staff absences.

GBP

Sterling is weaker than most major currencies in the early morning trade. Inflation-pinched British consumers cut their shopping by the most in the key month of December in at least 25 years, official data showed this morning, dashing hopes for a Christmas boost for the country’s flagging retail sector. Sales volumes were down by 5.8% compared with December 2021, the biggest fall for that month in records going back to 1997, and the ninth month in a row that they fell in annual terms. Sterling fell against the U.S. dollar and the euro.

EUR

Euro is well bid against most major currencies overnight. The agreements signed between the European Commission and pharmaceutical companies to roll out COVID-19 vaccines offered significant long-term benefits to the corporations involved to the detriment of public health and global equality, research by NGOs has found. Two reports released yesterday and authored by Global Health Advocates and STOPAIDS, a UK-based non-profit, accuse the EU’s executive of redacting contracts with pharmaceutical companies and accommodating industry requests on such things as pricing, intellectual property and confidentiality requirements in a bid to quickly roll out the vaccines for its population.

USD

The dollar is stronger against sterling and weaker against euro this morning. Federal Reserve Governor Lael Brainard said yesterday that interest rates need to remain high, even though there are signs inflation is starting to ease. Echoing recent comments from her fellow policymakers, Brainard insisted that the Fed won’t waiver in its commitment to taming prices that have come down some in recent months but remain near four-decade highs. “Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2% on a sustained basis,” she said in remarks prepared for a speech in Chicago.

Markets

European markets were flat this morning as stocks failed to rebound from yesterday’s selloff, with the outlook for monetary policy still firmly in focus. The pan-European Stoxx 600 index was little changed in early trade. Insurance stocks added 0.5% while autos fell 0.5%. The Dow Jones Industrial Average lost 252.40 points, or 0.76%, to 33,044.56, posting its third down day in a row and giving up its gains from the new year’s rally. The 30-stock index is now down 0.31% in 2023. Meanwhile, the S&P 500 fell 0.76% to 3,898.85, and the Nasdaq Composite shed 0.96% to end the session at 10,852.27. Both indexes are still positive for the year.

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

8:00 a.m.: UK Dec. CPI
9:00 a.m.: South Africa Dec. CPI
10:15 a.m.: ECB’s Villeroy speaks at Davos
10:30 a.m.: UK Nov. House Price Index
11:00 a.m.: Euro-Area Dec. CPI
1:15 p.m.: ECB’s Villeroy speaks at Davos
2:30 p.m.: US Dec. PPI, Retail Sales
3:15 p.m.: US Dec. Industrial Production
4:00 p.m.: US Jan. NAHB Housing Market Index
Fed releases Beige Book

Corporate Events

Earnings include Prologis, EQT, Schwab, PNC Financial, Discover Financial, First Horizon, Kinder Morgan and Alcoa

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.