Published: 14/02/2023 By ECAPSterling managed to find some support this morning after the release of the latest U.K. labour data. The data showed a drop of almost 13,000 in the claimant count in January, suggesting the labour market remains strong despite the country’s economic difficulties. Although the pace of growth in basic pay in Britain sped up again in the last three months of 2022, underscoring the Bank of England's worries about inflationary heat in the economy, other data published this morning suggested a cooling in the labour market. The pace of pay growth in Britain is being monitored closely by the BoE as it gauges how much higher to raise interest rates.
The European Commission lifted its economic forecasts for the EU yesterday, saying the bloc will likely dodge a recession thanks in part to a dip in gas prices. Nevertheless, the Euro started the week on the back foot against most major peers but managed to close in positive territory against the greenback after it lost some strength amid the positive shift witnessed in the risk mood. Looking forward, markets are expected to remain quiet this morning as investors move to the side-lines while preparing for key macroeconomic data releases that will ramp up the volatility. The European economic docket will feature the Employment Change and Gross Domestic Product data for the fourth quarter. However, all eyes will focus on the early American session where the US Bureau of Labour Statistics will release the all-important Consumer Price Index inflation data for January.
The Dollar retreated in early European trade this morning ahead of the latest readout of U.S. consumer inflation. The dollar has traded in something of a holding pattern over the last few days as traders awaited the release of the latest U.S. consumer price index, which could provide further clues on the Federal Reserve's policy outlook. The US central bank raised interest rates by 25-basis points earlier this month, tempering the pace of its rate hikes, but the bank’s policymakers were keen to say that the fight against inflation continues and further increases should be expected. Attention thus turns to today’s January inflation report, with the headline number expected to show that consumer prices rose at an annual pace of 6.2% in January, down from 6.5% in December and well below June's four-decade peak of 9.1%. That said, markets are also wary of any potential bigger-than-expected surprises in core inflation, which excludes volatile energy and food prices, as the labour market remains strong, potentially powering wage growth.