Market Report : 10.03.23

Published: 10/03/2023 By ECAP

Sterling gathered some strength this morning after data released showed that UK gross domestic product rose by 0.3% month-on-month in January, above the expected 0.1%. This, to a larger extent, offsets the disappointing release of the UK Manufacturing and Industrial Production figures, which, in turn, is seen lending some support to the pound. Signs that the British economy is proving somewhat resilient could help the Bank of England to decide to raise interest rates again this month. In the meantime, price action around Sterling should continue to closely follow dollar dynamics, as well as the potential next moves from the BoE.

The Euro gathered some support this morning with a marginally weaker USD and better than expected German CPI data. Although actual numbers printed in line with forecasts, the 8.7% figure highlights the elevated and stubborn inflationary pressures in Germany. With Germany being the largest economy within the eurozone, the inflation release acts as a proxy for the broader region, adding to hawkish sentiments from the European Central Bank. Ultimately, while Fed pricing remains in a state of indecision, the ECB’s March meeting looks to be a sure thing at 50-basis points, placing added interest on today’s Non-Farm Payroll report.

The dollar handed back some of the week’s strong gains after yesterday’s jobless claims data showed that the number of Americans filing new claims for unemployment benefits increased by the most in five months. However, losses are minor as traders await the release of the widely-watched monthly payrolls report later in the session. This was an economic release that Federal Reserve Chair Jerome Powell specifically mentioned earlier this week as influencing the thinking of the central bank policymakers as far as further interest rate hikes are concerned. Non-Farm payrolls are expected to have increased by 205,000 jobs last month, a slowdown from the blockbuster 517,000 added in January, but the possibility of another upside surprise exists, especially after Powell’s hawkish tone in his semi-annual testimony to Congress.