Weekly Wrap: US data in focus

Written by Citadel Global Director, Bianca Botes

Consistently robust economic data out of the United States (US), coupled with stronger than expected Consumer Price Index (CPI) numbers, pushed markets back into risk-off trade this week. In line with the latest numbers, markets are increasing their bets that the Fed will keep interest rates higher for longer.

Key themes for this week include:

  • US data-releases point to further tightening
  • Equity markets shrug off interest rate fears, and focus on earnings instead
  • Gold subdued, on the back of a stronger dollar
  • Demand-woes weigh on oil
  • Dollar hits six-week high, while rand licks its wounds


On Tuesday, the release of the annual US inflation rate sparked fresh concerns, as data showed that inflation dipped only slightly to 6.4% in January from 6.5% in December and came in above market forecasts of 6.2%. While the reading is at its lowest level since October 2021, the higher-than-expected inflation print forced market participants to relook their rate expectations for 2023. Adding fuel to the fire, the country’s retail sales data indicated a resilient consumer, that further motivates a bias for a more hawkish US Federal Reserve (Fed). US retail sales increased 6.4% year-on-year in January, overshooting the 5.9% increase in both December and November 2022.

Meanwhile, the number of Americans filing for unemployment benefits rose to 196 000 in the week ending 4 February, from the previous week’s nine-month low of 183 000. Despite the number falling, the latest figures still suggest a tight labour market, which could also further contribute to inflationary pressure in the world’s largest economy. In addition, US producer prices increased 0.7% month-on-month in January, their biggest jump in seven months, and higher than market forecasts of 0.4%.

In December, Fed policymakers’ median projection suggested the Central Bank’s policy rate will peak at 5.1% this year. Markets are now expecting another rate hike of 25 basis points in March, while interest rate futures markets have priced in a peak of over 5.2% in July. Fewer traders are expecting any rate cuts in 2023.


The unemployment rate in the United Kingdom (UK) remained unchanged at 3.7% in the three months to December of 2022, the same as in the previous period, meeting market expectations. The British Office for National Statistics said there was a record high reduction in economic inactivity during the October to December period as people moved into work. The number of people employed in the UK rose by 74 000 in the three months to December, well above forecasts of a 40 000 increase, and following a 27 000 rise in November.

The annual inflation rate in the UK fell to 10.1% in January, down from 10.5% in December, and coming in below market forecasts of 10.3%. Inflation fell for a third consecutive month, to its lowest level since September 2022. The largest downward contribution came from transport – particularly passenger transport – motor fuels, restaurants and hotels. Prices also rose at a slower pace for food and non-alcoholic beverages, clothing and footwear, and furniture, in line with traditional new year discounting. In contrast, inflation accelerated for housing and utilities, recreation and culture, health, and alcoholic beverages and tobacco.

South Africa’s annual inflation rate eased for the third consecutive month to 6.9% in January, from 7.2% in the previous month, in line with expectations, but remains above the upper limit of the South African Reserve Bank’s (SARB’s) target range of 3% to 6%. It was the softest reading since May 2022, mainly due to slowing prices of transportation. Meanwhile, higher increases were seen for food and non-alcoholic beverages, notably bread and cereals, up 21.8%, oils and fats, up 18.5%, and vegetables, seeing a 14.3% increase. The annual core inflation, which excludes prices of food, non-alcoholic beverages, fuel, and energy, stood at a three-month low of 4.9% in January, unchanged from the previous month.

Meanwhile, South Africa’s composite SACCI Business Confidence Index sank to 112.9 in January, from an over-seven-year high of 117.3 in the previous month, mainly due to the adverse effects of the worsening power crisis. SACCI said, “The immediate needs of improving Eskom’s current capacity constraints and restoring its full generating capabilities should receive urgent attention.” In addition, retail trade contracted by 0.6% from a year earlier in December 2022, following an upwardly revised 0.8% rise in the previous month and missing market forecasts of a 0.1% decline. Retailers across the country continue to face rolling power cuts, with costs rising sharply as they implement alternatives to keep businesses open.


US stock futures, tracking the broader market, were flat on Thursday as investors await a slew of economic data to gauge the strength of the US economy, and to receive more clues on the Central Bank’s policy outlook. On the corporate side, Shopify, plunged almost 10% in premarket trading after the cloud-based commerce platform reported first-quarter revenue that missed expectations. In regular trading on Wednesday, the Dow Jones rose 0.11%, and the S&P 500 gained 0.28%, while the Nasdaq Composite rallied 0.92% for its third consecutive day in the green.

London-based equities climbed for a fourth consecutive session on Thursday, with the benchmark FTSE 100 climbing above the 8 000 mark to hit a new record high, largely driven by gains in the technology, industrials, and materials sectors. Multinational energy and services company, Centrica rallied more than 5% to lead the FTSE 100, saying it will extend its share buyback program by £300 million after its annual profit more than tripled. Banking giant, Standard Chartered was also among the winning stocks, adding over 2%, after announcing a new $1 billion share buyback following a 28% rise in annual pretax profit.

European shares climbed to a near one-year high on Thursday, with Germany’s DAX 40 crossing the 15 600 mark for the first time since February 2022. France’s CAC 40 set its sights on its all-time high of 7 384.86, hit in January 2022. Investors welcomed a batch of corporate earnings, while shrugging off strong US retail sales data which suggested that the Fed has more room to tighten policy. Drinks maker, Pernod Ricard’s first-half profit and sales beat forecasts, helped by price increases in the key Chinese and US markets. Germany’s Commerzbank’s net profit rose by a better-than-expected 12% in the fourth quarter.

Japan’s Nikkei 225 Index rose 0.71% to close at 27 696, while the broader TOPIX Index gained 0.67% to 2 001 on Thursday, undoing losses from the previous session. Japanese equities are finding support from a weakening yen that has boosted the outlook for the country’s export-heavy industries, while also making Japanese assets more appealing to foreign investors. Japanese stocks tracked Wall Street higher as the market’s bullish sentiment overshadowed strong US data and the threat of further tightening by the Fed.  Automakers led the rebound, with strong gains from Toyota Motor, Nissan Motor and Subaru Corporation.

The local JSE FTSE All Share Index soared more than 1% to trade above the 80 300 level on Thursday, its highest reading since 30 January, mainly driven by resource-linked sectors, tech stocks and industrials. South African President, Cyril Ramaphosa’s infrastructure and investment officer, Kgosientsho Ramokgopa, warned that the country’s key infrastructure is in a dire state and that fixing it will take years, even if immediate action is taken.


West Texas Intermediate crude futures bottomed out around the $79/barrel mark on Thursday, as concerns about sluggish near-term demand, particularly in the US, prompted investors to unwind some long positions following a rally that saw prices hit a peak of almost $81/barrel on 13 February. The latest International Energy Agency (IEA) report showed that US crude inventories jumped by 16.283 million barrels to 842.973 million last week, their highest level since early October, signaling weakening demand. In addition, prices have been under pressure after the US government announced plans to release 26 million barrels of oil from strategic reserves. Worries around tight supply also eased after the IEA said it expected record March production from the seven largest US shale basins.

Gold prices steadied around $1 840 an ounce on Thursday, as the dollar took a breather, while investors reassess the outlook for US monetary policy. The metal remains near to its weakest level in over five weeks as strong US economic data bolstered expectations the Fed will need to keep pushing interest rates higher to bring down inflation. Richmond Fed President, Tom Barkin, as well as Dallas Fed President, Lorie Logan, emphasised the need for further tightening should inflation persist above the target level of 2%.

Copper, which is widely considered an economic barometer, is trading in a narrow range around $4.10/pound, nearly 5% softer than its seven-month peak of $4.30/pound seen in January. Persistent fears of a global recession have offset optimism around China’s reopening. Meanwhile, on the supply side, after road blockades prevented the delivery of raw materials, Chinese mining company, MMG, said its Las Bambas copper mine in Peru has now secured necessary supplies, and it is able to continue production, albeit at a reduced rate. Speculation, however, is growing that copper markets could be heading into a severe deficit amid increasingly challenging supply streams in South America.


The US Dollar Index turned positive, and rose to above 104, on Thursday, following a brief pause. The greenback made its way to a six-week high after stronger-than-expected producer price inflation reinforced expectations that the Fed will need to extend its tightening cycle.

The euro continued its approach towards $1.08 this week but remains below nine-month highs of $1.10 touched earlier in the month, as investors continue to bet on a longer period of high interest rates and adjust their positions accordingly. The European Central Bank is expected to raise key policy rates by another 50 basis points in March and to deliver another 25-basis-point hike after that. The ECB deposit rate is currently at 2.5%, but the peak rate is expected to reach 3.25%. Across the Atlantic, the Fed is expected to deliver at least two more rate hikes, with a peak of around 5% to 5.25%. No cuts are expected in borrowing costs this year.

The British pound hovered around the $1.20 level, remaining below the $1.24 touched earlier in the month, after the latest CPI figures offered some relief that UK price pressures may finally be easing, resulting in increasing bets that the Bank of England will not need to pursue an increasingly aggressive policy stance and that it might move to pause hikes in March. Money markets are now pricing a 4.55% interest rate peak by September, compared to 4.69% before the CPI report.

The South African rand continued its descent, to break above the psychologically and technically important R18.00/$ mark, to trade at its weakest level since early November 2022, on the back of a stronger greenback and a deteriorating outlook for South Africa’s economy. Sustained power cuts, enforced by the state-owned power utility Eskom, to curb a total grid collapse, continues to plague businesses and undermine economic growth while also bolstering inflation. Eskom recently stated that rolling blackouts would likely persist for at least two more years as it overhauls its aging, mostly coal-fired plants. According to SARB estimates, the electricity crisis costs the country as much as R899 million per day.

The rand is trading at R18.22/$, R19.38/€ and R21.77/£.