Daily Market Outlook, February 7, 2023

Powell’s Speech The Highlight of The Day, First Post Payrolls Remarks

“Asian equities traded with mixed tone overnight following on from a very quiet session on Wall Street, as investors were reluctant to extend risk ahead of a speech by Fed Chair Powell, who addresses the Economic Club of Washington later today, investors will parse Powell’s comments for his read on the red hot jobs data in the US Friday, these come in light of lasts weeks post rate announcement press conference when markets believed the Fed Chair gave the first clear acknowledgement of the start of the disinflationary process in play, however, the employment data on Friday has pushed market pricing in favour of further rate hikes given the continued tightness in the US labour market. Overnight the Australian central bank raised rate again and confirmed they expected further hikes to follow given the re-emergence of inflationary pressure in the economy, this move comes as markets were starting to reprice lower rates down under before inflation data came in hotter than expected, leading investors to consider inflationary pressures returning on a global scale, Fed’s Bostic’s remarks overnight supported this view suggesting that employment data could lead to a higher terminal rate stateside

European bourses are taking the soft handover from Asian markets with the EuroStoxx CAC and Dax trading lower, the stand out performer is the FTSE being supported by record earnings from BP this morning, who announced a £2.7Bln stock buyback programme. In the foreign exchange markets the unwind in Dollar weakness is attracting attention, with investors piling into Dollar call options and increasing bets on a return to EUR & GBP weakness, notably €500million trading on a nine month 0.9500 USD call structure ”