The Christmas holiday is light, and the economy in 2023 is worrying

[The dollar regained some lost ground]

The U.S. dollar regained some of the losses recorded by the yen's surge on the back of U.S. economic data. The number of Americans filing new claims for jobless benefits rose less than expected last week, suggesting the labor market remains tight. A separate report also confirmed that the U.S. economy rebounded faster than previously estimated in the third quarter. Solid economic data reinforced the need for the Federal Reserve to maintain aggressive monetary policy tightening, with rate hikes likely to last longer, limiting the dollar's losses.

[Challenges facing the British economy]

The UK's public sector net borrowing hit a record high for the same period in November, underscoring the challenges facing the UK economy. The final value of GDP showed that the British economy shrank more than the initial value in the third quarter of this year, making it the bottom of the Group of Seven (G7). The economic situation in 2023 will be dismal. The UK is likely to continue to underperform. The UK is expected to suffer the worst recession among major advanced economies in 2023, as headwinds from both monetary and fiscal policies are severe.

[Prospects of the world's major economies and major markets in 2023]

Nomura released an analysis of the outlook for the world's major economies and major markets in 2023, pointing out that as the long-term recession in the United States and Europe continues to spread to Asia, Asia will face various challenges in the first half of 2023. Six quarters of recession - three markets with GDP growth rates of -0.8%, -1.4% and -1.5% in 2023, respectiv. However, Australia, Canada, and South Korea have shorter recessions and will be affected by the downturn in the real estate market.

[The dollar may fall in 2023]

The U.S. dollar is still grossly overvalued despite its recent decline and should fall in 2023, but not in a straight line, Bank of America said. The market generally believes that inflation will fall, the Fed will start cutting interest rates, and the dollar will weaken, but the actual situation is "much more complicated than that." The Fed may stop raising rates but is unlikely to cut them as inflation is likely to be sticky on the way down. For the dollar to actually weaken, we need a significant drop in inflation.

[Fed policymakers emphasize hawkish stance]

Fed policymakers have been emphasizing their hawkish stance on the need to raise interest rates and tighten monetary policy until inflation is brought under control. This came after several policymakers underscored the central bank's commitment to reducing inflation to its 2 percent target and stressed the need for clear evidence of easing price pressures. The dot plot shows rates will hit 5.1% by the end of next year, up from 4.6% forecast in the previous round. However, overnight index swaps suggest the Fed will only raise rates by around 50 basis points before its meeting in May next year, before cutting rates by 50 basis points by the end of 2023.

[Traders are unwilling to take risks when going out during the Christmas holiday]

The U.S. economy grew faster than previously expected in the last quarter, ahead of a much-anticipated inflation report due on Friday, and U.S. Treasury yields are currently mixed as the yield curve inverts deepen. Showing how U.S. economic growth rebounded in the third quarter, from the Fed's perspective, this will hopefully provide a good platform for the economy to achieve a soft landing. Don't read too much into this week's market action, volumes are falling and are expected to continue to deteriorate ahead of the Christmas and New Year holidays when many traders will be out or risk-averse.

[Sterling, gilts and other UK assets look unattractive]

British assets, including sterling and UK government bonds, look unattractive given the country's high debt, poor economic outlook and Brexit fallout. There are a number of ways to reduce the UK government's high debt levels, including austerity policies and economic growth to boost revenues. But Britain's struggling social and healthcare systems meant austerity would be a "painful affair" amid weak growth prospects. Furthermore, Brexiteers in the UK do not seem to have grasped reality, and this is unlikely to change anytime soon.

[European Commission approves Poland's 3 billion euro economic support plan]

The European Commission approved a 3 billion euro Polish economic support plan, which was approved based on the EU's state aid interim crisis framework. In the context of the European energy crisis, the Polish government applied to the EU for the plan to support national economy.