Market Reports : 17.02.23

Published: 17/02/2023 By ECAP

The Office for National Statistics reported that domestic Retail Sales grew 0.5% in January against consensus estimates for a 0.3% fall. Furthermore, sales excluding fuel also surpassed market expectations and rose by 0.4% during the reported month. The better-than-expected prints, however, were offset by a downward revision of the previous month's already weaker readings. This, in turn, failed to provide any meaningful impetus to the pound, which seems likely to end the week on the back foot. That said, the softer UK consumer inflation figures released earlier this week fuelled expectations that the Bank of England's current rate-hiking cycle might be nearing the end. Ultimately, this too continues to weigh on Sterling.

The Euro declined in European trade this morning for the third straight session against the US dollar, plumbing six-week lows and heading for the third weekly loss in a row on concerns about increasing policy gap between the US and Europe. However, bets for additional jumbo rate hikes by the European Central Bank have contributed to the Euro's relative outperformance against its British counterpart. Looking forward, there won't be any high-tier macroeconomic data releases today. Nevertheless, ECB policymaker Francois Villeroy de Galhau, who recently said that the Eurozone was not very far from the peak of inflation, will speak during the European trading hours.

The dollar surged overnight to hit a six-week high, as a bout of resilient economic data out of the United States raised market expectations that more interest rate hikes were in the offing. Yesterday’s data showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while other data revealed that monthly producer prices increased by the most in seven months in January. The latest data releases gave the dollar a leg up, knocking sterling, euro and the Japanese yen to fresh six-week lows this morning. That pushed the U.S. dollar index to a six-week top of 104.44, putting it on track for a third straight week of gains.