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  • richard evans

Good morning


UK inflation hits 9% as ex-BoE head King says rates at 1% are just nowhere near enough and wants a sign that BoE are really determined to get on top of the problem. I wonder whether there will be any talk of 50bps rate rises sometime in the coming weeks, we have seen other central banks forced to push rates more than 25bps. Even ECBs Knot said they ECB could push rates up 50bps in July.


Feds Mester has become one of the first Fed officials to say a 75bps rise is on the table at their next meeting. Feds Evans meanwhile has said he would like to see speeding up of tightening. Powell continued with his hawkish talk, making it clear rates will move to neutral and even beyond, until it is satisfied it has some control on inflation. Strong US retail sales yesterday, including upside revision to last months release, suggests rises so far have not hurt the economy too hard. A long way to go mind you, but for now the talk of recession is a little quieter.


Despite this USD has failed to recover its recent losses, with GBPUSD in mid 1.24s and EURUSD 1.0520, EURGBP at 0.8455 (GBPEUR 1.1825). As you know I’m a little worried about GBP while this NI protocol talk goes on. EU made some noises that they may be willing to make changes to the Agreement, but whether this is enough to stop UK tearing up the agreement remains to be seen. As I type GBP may be just losing some of its gains, I had warned that we’d likely see selling of GBP on rallies, GBPUSD tested 1.2500 several times but failed to break and is slipping back. Lets see if 1.2400 holds.


China markets ended lower, no sooner did Shanghai say they had not community cases, markets look at Beijing where Covid cases are on the rise. Number still relatively low but with their zero Covid policy, lockdowns are highly likely. In the US, a new Covid wave seems to be in the making, with firms such as Apple looking to reintroduce face masks in stores and even in common spaces at their headquarters.


Closer to home, it wasn’t that long ago that I could name several people I knew, or knew of, with Covid. Right now I do not think I can name one. I’m certainly not saying its gone away but the signs are encouraging.


CAD CPI today, markets looking for numbers similar to last month, anything firmer will likely send CAD a touch higher although market already looks for a 50bps rate rise in June, following Aprils 50bps rise. Inflation numbers from the EU today are final reading and as such should be close to expectations and shouldn’t provide any great shock.


I’m out and about meeting clients today, there will be no report tomorrow, normal service to resume Friday. I’ve added Thursdays calendar below, looks quite lengthy. By the time you get my next report we’ll have seen UK retail sales numbers. I’m still wondering whether high retail sales data is down to high prices or high demand. Answers on a postcard please….


- 10.00 EU HICP

- 13.30 US building permits, housing starts

- 13.30 CAD CPI

- 21.00 Feds Harker speaks


Thursday


- 00.50 Japan merchandise trade balance

- 02.30 AUS unemployment

- 03.00 NZ budget

- 12.30 ECB minutes

- 13.30 UYS initial jobless claims, philly fed survey

- 13.30 ECBs de Guindos speaks

- 13.30 CAD new house prices

- 15.00 US existing home sales

- 23.45 NZ trade balance

- 00.01 UK GfK consumer confidence

- 00.30 Japan CPI

- 02.30 PBoC rate announcement

- 07.00 UK retail sales


  • richard evans

Good morning


Firstly, apologies for the lack of report yesterday morning. I had a hospital appointment for my shoulder very early, somehow they were running behind by over an hour even though they can’t possibly have had enough patients to delay them.


I know you are all on the edge of your seats wondering about the weekend football results. Saturday didn’t go quite to plan, we lost 3-1. But Sunday, the big one, my U15s came away with a 2-1 win to lift our first ever trophy. The match was played in a proper football stadium and the players had to climb stairs to receive their medals and trophy. It all felt rather special, I am so pleased for them, really they deserve it.


Asian markets made gains overnight, a bit of positive risk sentiment creeping in which saw stocks higher and USD lower. Not sure if the positivity has come from Russia seeming to accept Finland and Sweden’s NATO membership, although Turkey seem to be doing their best to veto plans. Also helping China was reports from Shanghai that some reopening is taking place after three days of no community Covid transmissions.


UK unemployment came out better than expected this morning, with a larger drop in claimants than forecast and a lower overall unemployment rate. GBP has taken some comfort from this, with GBPUSD trading up above 1.2400 and EURGBP down to 0.8440 (GBPEUR 1.1850). An announcement on the NI protocol is expected today, GBP so far not dented by this. Tomorrow morning we will see the latest UK inflation numbers, widely expected to show further increases. Last month the YoY headline was 7%, it is expected to be up around 9% this time, the highet level for 30 or so years.


RBA minutes offered support for AUD with a suggestion of further rate rises at future meetings, perhaps greater than 25bps. The hope that China could be opening up also helps AUD, which has moved from a low yesterday of 0.6880 to 0.7020 as I type. AUDNZD up at 1.1050, while GBPAUD is currently 1.7680, well off the lows around 1.7605 pre-UK data.


Goldman Sachs have put out a report suggesting USD is nearly 20% overvalued. Comes on the back of last weeks report that suggested USDJPY was 25% overvalued. Does this mean we expect to see GBPUSD up at 1.5000 anytime soon? Can’t see that myself, not with a strong of US rate rises still on the agenda. Kind you UK rates are going up and I see a poll of economists saw all 39 questioned expecting an ECB rate rise in July. EU GDP out this morning, US retail sales will be seen this afternoon.


Just touching back on football for a bit, Spurs seem to have got themselves very near to a place in the Champions league having beaten Burnley at the weekend and seeing Arsenal lose to Newcastle yesterday evening. Spurs need just one point from their match against Norwich on Sunday to claim the valuable fourth spot. Surely nothing can go wrong!


- 10.00 EU GDP

- 13.00 Feds Bullard speaks

- 13.30 US retail sales

- 14.15 US industrial production

- 15.00 US business inventories

- 18.00 ECBs Lagarde speaks

- 19.00 Feds Powell speaks

- 19.30 Feds Mester speaks

- 00.50 Japan GDP

- 01.30 AUS wage prices

- 05.30 Japan industrial production

- 07.00 UK CPI, RPI, PPI



  • richard evans

Good morning


Both Feds Powell and Daly repeat that 50bps rises at the next two meetings is appropriate, the latter making clear 75bps is not really a consideration. US markets ended mixed but Asian markets ended the week on an optimistic footing with most indices posting gains, helped in no doubt by the idea that Fed will not necessarily look for steeper interest rate rises.


GBPUSD 1.2225, perhaps a little calmer although don’t forget next week could have a lot more talk on the Northern Ireland protocol, unlikely to offer much support I fear. We also hear of plenty of interest to sell GBP on rallies which is likely to cap the upside.


EURUSD at 1.0405 with some attention on mid 1.03s being near 20 year lows. EUR failed to hold recent gains against GBP, EURGBP now 0.8515 (GBPEUR 1.1745). This is more to do with EUR weakness than particular GBP strength mind you.


Bitcoin traded down to $25,500 yesterday but has recovered to $30,000, the panic selling seems to have run its course, for now, perhaps contributing a little to the general positive risk sentiment. Gold slipped a little lower, now $1825 after finding support around $1810.


USDCNY fixed 6.7898 but has traded above 6.8100 for the first time since Q3 2020 amid reports of panic buying in Beijing on rumours of a lockdown there, which is being denied. Shanghai still not open, some talk from officials suggests it will be another week before any restrictions can be lifted. Meanwhile Hong Kong bought HKD aggressively again to keep USDHKD within its peg.


Elsewhere in the world, If you thought interest rates were high, I see Argentina raised rates 2% to 49%, the fifth rise this year in an attempt to control inflation. Finland is looking to join NATO which is hardly a surprise given the threat posed by Russia although Russia will no doubt call this an act of aggression.


The doom and gloom I seemed to feel yesterday was lifted by Spurs beating a rather undisciplined Arsenal pretty convincingly. I know there are a few Arsenal fans on here so I’ll just say it evens the season up after Arsenal beat Spurs back in Sept. Spurs Champions league chances remain alive but fourth place is still Arsenals to lose.


This weekend my U15s actually play in two cup finals, one Saturday and one Sunday. Both are important, the Saturday is more for players who don’t get to play regularly on Sundays, the Sunday final is the more prestigious where we play a team from the division above us. I am already nervous. We’ve had such a terrific season so far it would be wonderful to come away with some silverware. I’ve had to leave some players out of the teams although everyone in the squad will get to play in at least one final. The hardest part is choosing which of my two assistants I will take to the dugout with me Sunday, the league insisting only two people can be there. A bit mean for kids football given the hard work all the volunteers put in. Lets hope the disappointment is outweighed with a win. I’ll let you know Monday.


- 10.00 EU industrial production

- 13.30 US import, export prices

- 15.00 US Michigan sentiment survey

- 17.00 ECBs Schnabel speaks

- 17.00 Feds Mester speaks

- 20.30 CFTC position data

- Monday

- 03.00 China retail sales, industrial production