Gentium FX | Daily Report - 14th January 2023 - UK Data Will Be Key This Week

GBP: Sterling has taken a back seat so far in 2023 with a light UK economic calendar however, with both labour market data and December CPI due this week we should expect some volatility. Last week expectations of a 100bp rate hike by the Bank of England had started to soften. It will be interesting to see if the economic data due this week will support softer expectations. Today, we await Andrew Bailey’s testimony on the Financial Stability Report (FSR) before the Treasury Select Committee at 15:00 GMT, especially after the UK Gross Domestic Product (GDP) unexpectedly expanded by 0.1% MoM in November. Sterling remains subdued at the start of the new trading week.

EUR: In Europe, the focus this week will be on key speakers at the World Economic Forum in Davos, where European Central Bank President Christine Lagarde will speak on Friday. We will also see some German data in final CPI and the ZEW investor expectations survey - which is expected to have improved. Interest rates remain a hot topic in Europe and with at least another 100bp of tightening expected before too long the Euro remains well supported.

USD: The US Dollar remains under pressure as global risk sentiment remains elevated. Market optimism combined with hopes of slower Federal Reserve rate hikes seem to be weighing negatively on the greenback. Markets are pricing in roughly 80% odds of a 25 basis points (bp) Fed rate hike in March, with a 25 bp fully backed in at the start of the next month, following soft US inflation data last week. This week, US Retails Sales, UK inflation and speeches by Fed members will be closely monitored.

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