The FP Markets research team produce First Light News around the European open, ensuring traders and investors have the news needed to begin their day.

Good morning.

Thursday welcomed two central banks and two 50 basis-point increases.

The Bank of England (BoE) raised the Bank Rate by 0.5 percentage points to 4.0%, a 14-year high. This marks the tenth consecutive time the BoE pulled its benchmark rate higher as the economy continues to battle double-digit inflation (10.5%). The MPC voted by a majority of 7–2 to increase the Bank Rate by 50 basis points; according to the Monetary Policy Summary, two members—Swati Dhingra and Silvana Tenreyro—voted to leave the rate unchanged. Another key point of note was that the central bank believed inflation has peaked. Against the US dollar, the British pound immediately spiked to a high of $1.2391 before pulling back to pre-announcement levels and continuing to pursue lower terrain to end the day 1.2% lower, the currency pair’s largest one-day decline since 5 January. The FTSE 100 dived to a low of 7,785 in the immediate aftermath of the announcement, though swiftly reclaimed pre-announcement levels and punched to a high of 7,838 heading into US hours.

The European Central Bank (ECB) followed the BoE an hour after by delivering another half-point increase, pulling its Main Refinancing Rate to 3.0% and the Deposit Rate to 2.5%. The ECB made it clear that a further 50 basis-point hike is in the offing for March’s meeting. According to the press release, ‘the Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target’. Note that euro area annual inflation is 8.5%, following the peak in October (2022) at 10.6%. The EUR/USD immediately pushed lower after the rate announcement, and following a moderate consolidation further selling materialised with the day finishing 0.7% lower.

In other markets, major US equity indices largely ended on the front foot. The Dow Jones Industrial Average wrapped up -0.11% lower, the S&P 500 added 1.47% and the Nasdaq 100 climbed 3.56%. In terms of the S&P 500 Sectors, communication services rallied 6.57%, followed by consumer discretionary at 3.06% and technology at 2.73%. Laggards of the session were energy (-2.28%), consumer staples (-0.86%), healthcare (-0.68%) and materials (-0.32%).

Overnight, Asia-Pac equity indexes finished higher across the board; the Nikkei 225 added 0.4%, South Korea’s KOSPI advanced 0.47% and Australia’s ASX 200 rose 0.62%.

Markets Today

Aside from the FTSE 100 (+0.1%), European markets opened in negative territory this morning. The Dax, the CAC and the Euro Stoxx 50 are down by -0.79%, -0.46% and -0.53%, respectively.

As for the economic radar today, all eyeballs will be on the US employment situation report.

Tier-1 Economic Data in Focus:

US Non-Farm Employment Change for January at 1:30 pm GMT (Expected: 185,000; Previous: 223,000).

US Unemployment Rate for January at 1:30 pm GMT (Expected: 3.6%; Previous: 3.5%).

Month-Over-Month US Average Hourly Earnings for January at 1:30 pm GMT (Expected: 0.3%; Previous: 0.3%).

US ISM Non-Manufacturing PMI for January at 3:00 pm GMT (Expected: 50.4; Previous: 49.6).

Currency Markets as of 9:25 am GMT:

EUR/USD: $1.0901 -0.07%

GBP/USD: $1.2195 -0.23%

AUD/USD: $0.7047 -0.39%

USD/JPY: ¥128.66 -0.01%

NZD/USD: $0.6458 -0.28%

USD/CAD: C$1.3370 +0.41%

USD/CHF CHF0.9153 +0.28%