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Good morning

 

US PPI came in very slightly softer than expected yesterday but this has done little to slow the rise of the US dollar, which continues to make higher levels against most majors as the markets continue to question the notion of rate cuts in 2024. 

 

GBPUSD is now down to 1.2505, EURUSD 1.0675, putting GBPEUR at 1.1715, with EUR a little more on the defensive after the ECB rate meeting.  They did keep rates unchanged yesterday but said nothing to suggest a June rate cut is off the table, Lagarde making it clear ECB would not wait for Fed to cut rates before they take  action.  Indeed it is reported that some members were ready to cut rates yesterday.  Meanwhile USDJPY sits at 153.35, oblivious to the ongoing verbal intervention from Japanese officials. 

 

UK GDP this morning came in at +0.1% as expected, hardly ground breaking stuff but at least it is still in positive territory.  Industrial production data was stronger than expected but this wasn’t enough to stop the GBPUSD sell-off.  I am wondering whether we are seeing USD buying ahead of the weekend as we did last week as a flight to safety amid renewed concerns Iran will attack Israel in retaliation for the recent Israeli attack on the Iranian embassy in Syria. 

 

US have apparently asked China to ask Iran to not attack Israel, in something that sounds very much like playground type tactics.  Iran has reportedly said it will respond the Israeli attack but in a way that will not escalate the middle east situation.

At midday we will see the Bernanke review of BoE procedures which is likely to lead to reforms at the central bank in terms of forecasting and communications but should have no impact on monetary policy.

 

Gold prices have continued to make new highs, trading within a whisker of $2,400.  This comes despite the USD strength we have seen and the support seems to be coming from official purchases, such as China’s building of gold reserves.  I read an interesting article yesterday that suggested there was more to China’s gold buying than simply holding the metal, instead it will become part of a plan to move away from dollarisation.  USDCNY remains in the high 7.23s.

 

China trade overnight showed a $58.5bn surplus which looks healthy enough but was over $10bn lower than expectations and less than half the number reported for February.    

 

It wasn;t a good night for English teams in the Europa league quarter finals, with Liverpool suffering a heavy 3-0 defeat at the hands of Atalanta and West Ham losing 2-0 to Bayer Leverkusen.  Plenty of work for both teams to do in the second leg.  Aston Villa managed a 2-1 win against Lille in the Europa Conference quarters.  I’m hoping English teams do well as it may mean an extra Champions League place for English teams next season, which in turn would take some of the heat off Spurs needing a top four finish.  Spurs take on Newcastle in the 12.30 match tomorrow.

 

In golf, big hitter DeChambeau leads the Masters by one shot over Scheffler.  Some players didn’t manage to finish their first round after the start was delayed for thunderstorms.  This means many will have to finish their first round and then go straight into their second round.  I know they are all quite fit these days and they don’t have to drag their own bag around but even so that is enough to make life a little uncomfortable.  They may not even have time for a couple of pints and a sandwich at lunch time. 

 

One other sporting event this weekend is the Grand National.  I’m not a huge horse racing fan, much to the disappointment of my eldest who is quite a fan and would dearly love me to own a couple of race horses.  I’m not actually suer if the Grand National really appeals to horse racing fans in the same way that it appeals to the rest of the nation.  It is one of the biggest days in the bookies calendar that’s for sure. 

 

To pick a winner you might as well draw a name out of the hat.  Each way bets or top 4/6 place finishes are safer if you’re more into not losing money.  Looking at the names, I Am Maximus is pretty cool, while Delta Work leads me to think of options trading, something that as you know is a big part of our business.  Otherwise, Rachel Blackmore on Minella Indo could be worth a flutter.  Do bear in mind though that my knowledge of racing is minimal and should only be taken with a pinch of salt.

 

Could be a decent couple of days over the weekend weather-wise.  Might even hit 20°c today.  I’m in the Isle of Wight later today to see some clients, friends and acquaintances, must remember the sunglasses and suntan lotion… 

 

Have a great weekend as and when it comes.

 

-  12.00 BoEs forecast report

-  12.00 ECBs Elderson speaks

-  15.00 US michigan sentiment survey

-  19.30 Feds Bostic speaks

-  20.30 Feds Daly speaks

 

 

Good morning

 

The US inflation release yesterday really sent the markets running for cover with both the headline and the core reading coming in above expectations.  The US dollar shot higher and has held most of those gains.  GBPUSD traded down from 1.2705 to a low of 1.2520 while EURUSD moved from 1.0865 to 1.0730.  USDJPY flew higher after the announcement, breaking the 152.00 area with ease and pushing on to 153.15 where we trade as I type, Japan officials have been trying once again to talk JPY up but they know ultimately that fighting against a strong US dollar is a very tough battle to win. 

 

The higher reading throws yet more doubt on the chances of a June rate cut, particularly when we remember that higher oil prices must surely impact next month’s inflation number.  Markets have shifted to price in just two rate cuts this year and we may have to wait until November for the first cut according to some.  The release of the FOMC minutes yesterday evening, which showed almost all Fed members thought rate cuts would be appropriate this year, did nothing to stop the higher USD. 

 

Perhaps it was Biden’s comment on the inflation report that helped USD make the gains it did.  He said a rate cut may be delayed for a month due to the CPI reading.  It is quite unusual for a President to be so specific when it comes to monetary policy.  He did add that rate cuts would still come, although I have seen more than one forecaster talk of potential for rate rises before we see rate cuts.

 

The large trade I mentioned yesterday on US interest rate futures is now $50m out of the money, or of course in the money, depending on which side of the trade you’re on. One trade that did turn profitable however was my NZDUSD put option which in the morning had looked unlikely to offer anything other than lost premium, at expiry NZDUSD was below 0.6000 netting a small profit, before moving lower towards 0.5965. 

 

The US CPI release took some attention away from BoC’s rate meeting where they left rates unchanged.  USDCAD had pushed up after the US data from 1.3560 and continued to push higher post-BoC, reaching a high of 1.3700 by the London close.  BoC were mildly dovish with an acknowledgement that inflation was slowing, again I have to mention higher oil prices possibly ruining that line of thinking next month.   Still, UBS are looking for 1% of rate cuts through 2024 starting with a 25bps cut in June,

 

Today we have the ECB rate meeting.  No change in rates is expected, what will be of more interest is the press conference where we look for clues as to the timing of a rate cut, should it come.  I still think that out of Fed, BoE and ECB, it is the ECB  that has the greatest chance of a June cut.  BoE should come next and Fed currently last in line. 

 

We will also have the latest US PPI numbers this afternoon, another inflation release that is overshadowed by CPI but still a potential market mover, and higher than expected reading could offer further support to the US dollar.  Several Fed officials will be speaking, let’s see if they mention anything about inflation and/or rate cut chances.

 

Early tomorrow morning we will have UK GDP for February.  Market is looking for just 0.1%, hardly anything to get excited about but would be better than the negative readings we saw late last year. 

 

In sport, more Champions league action last night saw Barcelona and Atletico Madrid take a one goal lead into the second leg over PSG and Borussia Dortmund respectively.  Today sees more European action with West Ham, Liverpool and Aston Villa all involved in quarter finals. 

We also have the start of the US Masters golf, well we should have, although with thunderstorms forecast to hit Augusta there is a chance play will be disrupted.  I have only very rarely bet on golf, the odds of picking a winner out of the 89 or so players just don’t seem long enough to make it worthwhile.  For the record, Scheffler is favourite at 5-1, McIlroy is next at 12-1.  McIlroy is around evens for a top ten finish, hardly an exciting bet but possibly better value.

 

Have a great day.  Forecast here looks like it could be dry and warm for a couple of days, make the most of it if you can.  Its not getting dark until 8pm or so which means I could even nip over the road for a quick 18 holes after work…   

 

-  13.15 ECB rate announcement

-  13.30 US PPI, initial jobless claims

-  13.45 ECB press conference

-  13.45 Feds Williams speaks

-  17.30 BoEs Greene speaks

-  18.10 Feds Bostic speaks

-  23.30 NZ business PMI

-  04.00 China trade balance

-  07.00 UK GDP

-  07.00 German HICP

 

Good morning

 

I’ll start with RBNZ given yesterdays report caused a bit of a stir among readers.  Yes, I incorrectly stated that in February ANZ had been looking for rate cuts when in fact they had been looking for a rate rise or two.  They were disappointed back then, and again today, as RBNZ left rates on hold although their hawkish stance will be boosted by the central bank saying that rates will have to stay high for a sustained period to tame inflation.  They are nothe first central bank to suggest this and I am sure will not be the last.  NZD is higher, NZDUSD now 0.6070 so some way from the NZDUSD put option I mentioned yesterday with a 0.6025 strike.  A higher US inflation reading this afternoon is my only hope!

 

At the time of writing, GBPUSD is sitting at 1.2690, a touch higher than yesterday which in turn was a touch higher than the previous day.  EURUSD is actually unchanged at 1.0855 which has helped GBPEUR trade back up within a few pints of 1.1700.

 

The latest US inflation numbers will be released today.  The result should be pretty binary, ie a higher reading and a strong dollar, a lower reading and a weaker dollar.  Not much more to it than that,  The market is looking for slightly softer readings that last month.  Some excitement over press reports that an unnamed bond trader has placed a pretty huge trade that will be profitable if we see three rates cuts from the Fed this year.   Worth remembering that there are two sides to every trade so while emphasis is put on this, there will be a party that stands to make if we don’t see three rate cuts this year. 

 

At the moment, the odds of a June cut are pretty even, todays report could well set the tone for whether we’ll see anything in June.  Oil prices had started to push higher in March but it may be a month or so before we see the impact of higher prices on CPI.

 

USDJPY remains in the high 151’s, BoJs Ueda has said they will not use policy to directly resond to a weak yen, possibly clarifying his recent comments that suggested moving rates to help yen would be a possibility.  He does still say that if yen weakness were to impact inflation BoJ may look at rates, a very similar thing but not quite the same, rates won’t be used to push yen higher for the sake of it, but could if yen itself is affecting inflation.  Some press reports out of Japan suggest they may raise their inflation forecasts this month.  Elsewhere in Asia, I see Fitch have downgraded China’s outlook to negative from stable.  China aren’t happy.

 

We have a rate announcement from Canada today, they are expected to keep rates unchanged but as with RBNZ we’ll be looking to see any comments of potentially stickier inflation than has previously been hoped.  For the record, USDCAD currently 1.3565, GBPCAD 1.7205.

There was some exciting action in the first of the Champions League quarter finals where Arsenal drew 2-2 with Harry Kane’s Bayern Munich, while Man City won’t be too disappointed with a 3-3 draw at Real Madrid.  Some high quality football on display.  No English clubs are involved in this evenings quarter finals, but I’m hoping for equally exciting matches.   

 

Finally, my thoughts are with those in Cowes who experienced flooding Tuesday night after high tides brought water into the high street.  I’m hoping the damage isn’t too great although the pictures suggest many businesses will have been badly affected.  Unless I am mistaken we have seen the worst of the high tides.  The sun is shining today, not enough to dry things out but at least makes having windows and doors open slightly less of a chore.

 

It is my eldest’s birthday today. He’ll be 20, no longer a teenager, that’s enough to make me feel old.  He’s a pretty big lad, standing at about 6’3” in his socks.  Not bad going given he weighed just 4lb 4oz when he was born some eight weeks early.  Not quite sure how that happened.  Must take after his Mum…….

 

-  13.30 US CPI

-  13.45 Feds Bowman speaks

-  14.45 BoC rate announcement

-  15.30 BoC press conference

-  17.45 Feds Goolsbee, Barkin speak

-  19.00 FOMC minutes, monthly budget statement

-  02.00 AUS consumer inflation expectations

-  02.30 China CPI, PPI

 

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