March 9, 2023

“As the market prices in ‘larger for longer’ US interest rates, the Greenback appears firm, with recent employment data helping to consolidate expectations. Investors are closely monitoring Powell’s message and preparing for the upcoming Nonfarm payrolls report. The official jobs report due tomorrow, along with next week’s US Consumer Price Index, could be critical ahead of the March Mar 21-22 FOMC meeting. Later today, US Initial Jobless Claims data is due.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US job openings fell by a smaller-than-expected margin in January, and data for the prior month was revised higher, indicating that labor market conditions remain persistently tight. This could lead the Federal Reserve to continue raising interest rates for an extended period. However, the monthly Job Openings and Labor Turnover Survey (JOLTS) report from the Labor Department also revealed some signs of cracks in the labor market. The report showed that layoffs rose to a two-year high in January, job cuts were higher than initially projected in 2022, and fewer people voluntarily quit their jobs.

The UK economy is on track to avoid a recession this year, but slow growth means it won’t return to pre-pandemic levels until the final quarter of 2024, according to the British Chambers of Commerce (BCC). The BCC forecasted that the country’s economy is likely to shrink less than anticipated this year and avoid the two consecutive quarters of negative growth that constitute a technical recession. Other economic indicators, such as purchasing managers’ index (PMI) surveys and consumer confidence data, have also shown signs of improvement in recent weeks, supporting the brighter outlook.

GBP

Sterling is well bid against most major currencies overnight. The UK lacks a clear plan for achieving its goal of decarbonizing its electricity system by 2035, according to the country’s climate change advisers. This could jeopardize efforts to enhance energy security. Following Russia’s invasion of Ukraine, which caused energy prices to skyrocket, the country aims to reach net zero emissions by 2050 and improve its energy independence. As part of this objective, Britain has set a target of decarbonizing its electricity supplies by 2035 to reduce its reliance on imported gas. However, a lack of strategy could threaten the country’s energy security.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. Georgia’s ruling party announced that it is dropping a controversial bill on “foreign agents” after two nights of violent protests. The bill had been criticized by opponents as a Russian-inspired move toward authoritarianism that jeopardized the country’s hopes of joining the European Union. In a statement, the Georgian Dream ruling party stated that it would withdraw the bill unconditionally and without any reservations. It cited the need to reduce societal confrontation while denouncing “lies” told about the bill by the “radical opposition.”

USD

The dollar is weaker than most major currencies in the early morning trade. Investors appear to be cautious ahead of the eagerly-awaited February jobs report from the US, with the US Dollar Index (DXY) closing flat and edging slightly lower early this morning after Tuesday’s impressive rally. FOMC Chairman Jerome Powell, speaking on the second day of his semi-annual testimony, said that they have yet to make any decisions about the March policy meeting and reiterated that they are data-dependent. Meanwhile, data from the US showed that employment in the private sector increased by 242,000 in February.

Markets

European markets opened lower this morning as investors continued to digest comments from US Federal Reserve Chairman Jerome Powell. The pan-European Stoxx index declined 0.5%, with most sectors and major bourses trading in negative territory. Mining stocks experienced the largest losses, with a drop of 1.9%, while insurance led modest gains, up 0.3%. US stock futures remained flat early this morning, while Asia-Pacific shares were mixed as the Bank of Japan began its two-day monetary policy meeting, with investors keeping an eye out for any policy changes that could coincide with BOJ Governor Haruhiko Kuroda’s final meeting.

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

7:30 a.m.: France 4Q Private Sector Payrolls
9:05 a.m.: Riksbank’s Bunge speaks
10:30 p.m.: Bank of Italy releases Banks and Money monthly report
12:20 p.m.: Riksbank’s Jansson speaks
2:15 p.m.: BOE’s Breeden speaks
2:30 p.m.: US Initial Jobless Claims
6:30 p.m.: ECB’s Vujcic speaks
Informal meeting of EU trade ministers
Biden releases US budget proposal for fiscal 2024

Corporate Events

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