Market Update

Prospects for a gentle economic deceleration, akin to the smooth landing of an airplane, gained traction this week, thanks to unexpectedly robust PMI and GDP statistics and a dip in natural gas prices to $2.85 — a low not seen since June 2021.
Despite the US Q4 GDP slowing down to an annualized 2.9% from Q3's 3.2%, it surpassed the predicted 2.6%. This, coupled with the decline in weekly US jobless claims to 186,000 from 190,000, and promising US durable goods orders, illustrates an economy that's decelerating yet consistently expanding.
This optimistic data, however, might curb the Fed's inclination towards smaller interest rate hikes.
While the week's economic figures seemed well-balanced, akin to Goldilocks' ideal porridge temperature, a deeper look into the GDP data reveals growth predominantly driven by inventory accumulation and exports. Household consumption's role was rather limited, indicating the strain of inflation and increased debt servicing on American households, similar to the situation in the UK.
Thus, it wouldn't be unexpected if the Fed opts for a cautious approach, potentially raising interest rates by just 0.25% in the forthcoming week. There's also the possibility of a rate reduction before the year concludes.
With this in mind, our attention in the upcoming week will primarily be on the Fed's monetary policy meeting on 1 February 2023, followed by the BoE and ECB meetings on Thursday, and lastly, the US employment data release on Friday.