Daily Market Outlook, January 23, 2023

Risk Sentiment Supported By Fed ‘Plateau’ Expectations
Asian equity markets are mostly offline for Lunar New Year celebrations, Asian markets that are open are showing gains, as are European bourses and US futures, the bullish tone to markets is supported by reports in the Wall Street Journal over the weekend which suggest Fed officials are ‘preparing to slow interest rate increases for the second straight meeting’, this report underpins comments from officials last week that also hinted to most FOMC members preferring a 25bps move at the next meeting.
There is no tier one data on the docket for the UK today, this leaves little in terms of catalysts for UK investors at the open of trading for the week, the BoE will move into their black out period later this week ahead of their next policy announcement on the 2nd of February, no BoE speakers are scheduled to speak before then. The FTSE continues to teeter on the edge all time highs with bullish bets favouring a test of the 8000 level next.
In the Eurozone focus remains firmly on policy makers comments, over the weekend ECB officials continued to strike a hawkish tone adding support to the Euro which traded above 1.09 at the open of trading for the week. This week ECB officials Panetta, Visco, Vujcic and Holzman are set to speak, today ECB Chief Lagarde will also speak, after her appearance in Davos last week cemented her hawkish stance as she continues to express concerns regarding inflationary pressures.
The US data slate is also sparse today; the only release of note will be the US leading index for December, however, the data docket picks up later in the week with PMI’s tomorrow Q4 GDP Thursday and Core PCE Price Index due Friday. US earnings will also be in focus with tech heavyweights on deck with Microsoft and Tesla announcing Tuesday and Wednesday respectively.
Markets-wise, investors will continue to monitor the developing divergence between an increasingly hawkish European Central Bank and a more dovish tilt to the Fed, leading to ongoing strength in the Euro Dollar and increased pressure on the greenback. The weakness in the dollar continues to keep a bid under most major commodity markets with WTICrude above the $81 per barrel, Gold remains supported above 1900 bulls keep their sights on a test 1950.