FOMC dovish but keep rates on hold for now, BoE up next

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

FOMC did leave rates unchanged yesterday as had been widely expected, although the markets were taken a little by surprise that the interest rate projections came in lower than they did last time, with a 50bps cut being eyed this year compared to no change from the last projections.  Powell made it clear that the risks for the economy were now to the downside amid so much uncertainty, lower growth and higher inflation is never a good combination.  Even so, Powell did play down the chances of a recession in the US.

Trump has since come out and said the Fed should be cutting rates to help ease the impact of tariffs that look certain to being on 2nd April, in fact Trump went so far as to say 2nd April will be ‘Liberation in America Day’. 

The US dollar, which had pushed a little higher into the announcement, weakened with GBPUSD trading back up to break recent highs, reaching 1.3015 overnight, while EURUSD managed to hit 1.0915.  GBP has clearly had the better of it, with GBPEUR trading up to 1.1935 from a low yesterday morning around 1.1880.  UK employment numbers this morning were a touch better than expected.

Both GBPUSD and EURUSD are off those highs now, a bout of USD buying did see them trade to 1.2960 and 1.0865 this morning, both currently around 15 pips off those lows.

The lower USD saw gold make yet another record high, reaching almost $3,060 in the early hours of this morning, as geopolitical unrest and official demand continue to support prices.

Overnight we had NZ GDP and Aussie employment data.  NZ GDP was a mixed bag, coming in better than expected but with hefty downside revisions to the previous readings.  Aussie employment numbers were poor with a fall of 53,000 in jobs when a positive 30,000 or so had been expected, again we saw downside revisions to the previous months data.  AUDNZD has been heading lower for the past week or so and did hit a five month lower around 1.0910 overnight, but is off its lows at 1.0955 as the markets try to figure out which country is in worse shape.

We have a Turkish central bank rate announcement today, rates are currently at 42.5%.  TRY saw plenty of volatility yesterday as it was reported that Imamoglu, one of Erdogan’s key opponents, had been detained, triggering sharp falls in equity markets there.  Concerns rise that Erdogan is stamping his authority in a pretty undemocratic way.   USDTRY spiked to all-time highs at over 40.00, now back near 38.00.  It had seemed for a while that Turkey’s reputation in the global arena had been improving.  This certainly won’t help.

We also hear for the South African central bank today, there is mixed feeling here as to whether they keep rates on hold or but by 25bps.  Unchanged rates seems marginally the more likely.  Meanwhile SNB have cut rates by 25bps this morning, a move that was expected, even so EURCHF ticked up 50 pips or so to 0.9580.

Today the latest Band of England rate decision will be announced.  Everyone is looking for unchanged rates, however we will be looking at the vote split as well the scale of cuts voted for by dissenters.  You’ll remember that Mann surprised the markets by turning from hawk to super-dove at the last meeting, voting for a 50bps cut.  I’ll be interested to see whether she follows suit this time.  BoEs main dove, Dhingra, likely to vote for a cut, just remains to be seen what size.  Overall, a 7-2 split in the voting looks most probable.

A 25bps cut in May is being touted and some are still looking for a total 75bps of cuts this year.  We do have the UK spring budget next week where large spending cuts are likely to be announced given Reeves previously ruled out further tax rises.

In other news, Canada’s Carney has suggested Canada could join a new EU military project to decrease its reliance on the US.  Carney has called the EU ‘reliable allies’ as he continues to speak of the disrespect Trump has shown for Canada.  Ukraine’s Zelensky is due to address EU leaders today following his phone call with Trump yesterday, where Trump expressed interest in taking over Ukraine’s nuclear power facilities.   

So, a pretty full calendar today but a decent chance it could come and go with minimal fuss.  A brave call given the many issues facing the markets right now.  I’m, hoping its quiet, the weather forecast suggests we could see temperatures of almost 20°c this afternoon, its been a long time since I felt that sort of warmth outdoors.  I’ll be on my mobile….

Have a great day

-  08.30 SNB rate announcement

-  09.00 SNB press conference

-  09.00 ECB economic bulletin

-  11.00 CBRT rate announcement

-  12.00 ECBs Lane speaks

-  12.00 BoE rate announcement

-  12.30 US philly fed survey, initial jobless claims

-  13.00 SARB rate announcement

-  14.00 US existing home sales

-  18.05 BoCs Macklem speaks

-  21.45 NZ trade balance

-  23.50 Japan CPI

-  00.01 UK GfK consumer confidence

Gaza's fragile peace is broken as Israel launches fresh attacks

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

Poor US retail sales data yesterday gave trades a reason to start the week selling US dollars.  GBPUSD traded to a high of 1.2995 and EURUSD hit 1.0930 in the afternoon.  Equities were generally higher which was perhaps a slight mystery given the increased likelihood of a US slowdown but I guess they have come low enough that the odd correction is only reasonable.

Despite the weaker USD move running out of steam yesterday, as I type we are not only retesting but breaking those lows, GBPUSD now ticking above 1.3000 and EURUSD to 1.0940.  GBPEUR is 1.1875, just a shade lower than this time yesterday. 

Israel have struck targets in Gaza once again as a near two months of some sort of peace is broken after suggestions that Hamas was preparing an attack similar to that of 7th October.  Meanwhile there are reports that an Iranian ship has been sunk in the Red Sea by US forces, the suggestion being it had been helping Houthis target US vessels.  Trump has made it clear that Iran will face dire consequences if Houthi attacks on US military and shipping in the Red Sea doesn’t stop.  The lower USD move is a theme that has been running for some time now so it shouldn’t be a surprise.  However we tend to see a stronger USD when there is increased talk of war or conflict, we are not seeing that for the time being. 

Gold prices have made new highs around $3,025/oz, perhaps the looming threat of a new phase in the Gaza conflict is having an impact although I strongly suspect data will soon show that China has been continuing with their purchases in recent weeks and months.  I’m thinking there is more upside to be seen here.

Trump is said to be speaking to Putin today about peace in Ukraine and how best Ukraine’s assets can be divided to suit everyone, possibly other than Ukraine.  There is even talk Trump will officially recognise Russia’s control over Crimea.  Trump has also said he could well be hosting China’s Xi in Washington soon, those comments come as China conduct more military drills around Taiwan.

Canada’s Carney has been visiting Europe to strengthen ties.  Both Canada and Europe have been hit with Trump tariffs and it shouldn’t be a surprise that affected nations look to join together in order to combat the trade threat from the US.  Carney had strong words for Trump, saying they will not speak until disrespectful comments about Canada stop.  Carney has acknowledged that there is a limit to how much Canada can match US tariffs given the US economy is so much larger.  He is waiting to see what Trump does on 2nd April before any response is made.  On the subject of Canada, the latest Canadian inflation numbers are released later today, markets looking for a slight uptick from last month.  USDCAD continues to trade lower, currently 1.4275,

Overnight we’ll have the BoJ rate meeting.  There has been plenty of talk about a possible rate rise but it is not expected to be announced at this meeting.  Indeed, despite USD being generally lower, USDJPY is over 300 pips higher than last weeks lows, just a whisker away from 150.00. 

In other news, China’s electric car firm, BYD, have unveiled a new charging system much faster than Tesla’s superchargers.  The system could give a car 250 miles of range in five minutes, which would make stops no longer than refilling with petrol and as such make electric vehicles all the more practical.   The news won’t help Musks Tesla which has seen stock prices trade down from around $490 in December to a low last week of around $218.  A lot of that is coming, apparently, from political backlash against Musk and there is even talk he may be forced to resign from the board. 

I like electric cars and think with larger range and quicker charging they offer everything one needs to travel in style and comfort.  Remember we are still in the very early days of electric vehicle technology. However I’d love to know what the limits are for the national grid.  If everyone had superfast charging cars, would the grid be able to cope?  This is all on top of the high energy demands for data centres and AI infrastructure.  Wind power won’t suffice here.  That idea of net zero is looking less and less likely.

Finally, congratulations to Rory McIlroy for winning the Players Championship yesterday, on St Patricks Day of all days.  He has struggled to win a tournament for some time now, the Players isn’t a major but it will set him up well for the Masters which takes place at Augusta next month.

Have a great day…

-  10.00 German ZEW

-  12.30 US housing starts

-  12.30 CAD CPI

-  13.15 US industrial production

-  23.50 Japan trade

-  03.00 BoJ rate announcement

-  06.30 BoJ press conference

Apologies for missed or delayed reports

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

Firstly, apologies to the many of you who did not receive your email reports towards the end of last week.  My antivirus software seemed to have developed a habit of not allowing me to do my own work, but it seems to have been resolved this morning so hopefully now it is business as usual. 

Fortunately, after a busy start to the week, GBPUSD settled down in the latter part of the week, happy to sit between 1.2920 and 1.2960 for most of the time.  Not quite the same for other majors, EURUSD moved from a high early in the week of 1.0945 to 1.0820, before making another move back above 1.0900.  As I type it is 1.0905, and with GBPUSD having made a bit of ground this morning, now up at 1.2970, GBPEUR is 1.1890.

Trumps tariffs and possible resulting trade wars have had a profound effect on the markets, including sending global equity prices lower, although Friday did see some improvement, I fear which may be short-lived and no doubt we’ll see continued volatility.

A lot of talk of possible peace in Ukraine, Trump suggests he’ll be talking to Putin tomorrow, the two will likely plan to carve up Ukraine, something Ukraine has never wanted but I am sorry to say now seems rather inevitable.  The key I guess will be whether Russia is then prevented from further invasions, be it on Ukraine or any other country.

In sport, England came close to winning the six nations after a decisive win over Wales, but France got the four tries needed against Scotland to give them the bonus point to provide them with a pne point lead in the table, indeed they’d have won it on points difference anyway I believe so Scotland really had to win for England to claim the title.  England will come away quite happy althgouh it is fair to say their final matches were certainly against the easier of the opposition. 

In football, many congratulations to Newcastle for their victory over Liverpool in the League cup yesterday.  Let’s not talk much about Spurs.  It isn’t looking good there right now and I cannot help but feel that unless Spurs manage to somehow raise the Europa League trophy, Ange’s job is likely to be over.  With Spurs not firing on all cylinders, indeed hardly firing on any cylinders at all, a Europa Cup win is a nice idea but not particularly realistic I fear.  Meanwhile, Forest continue their incredible season with a win over Ipswich, Forest third in the table with a five point advantage over fourth placed Chelsea. 

Elsewhere, the F1 season began with a pretty exciting race in Australia that saw seven different constructors take the top eight places, something that bodes well for the season ahead.  The Chinese grand prix is up next, starting this coming Friday.

Todays calendar isn’t long but US retail sales are always of interest, perhaps more so now as we look for signs of any slowdown in domestic demand.  We do have a bust week ahead, the highlights being the Fed and BoE rate announcements on Wednesday and Thursday respectively.  We also have EU, Canadian and Japan inflation, BoJ, SNB and PBoC rate meetings, NZ GDP, and UK and Aussie employment numbers.  Never a dull moment.

I’ll leave it there fort now given how late you’ll be receiving this, but I’m hopeful full service will be resumed tomorrow morning.

Have a great day…

-  12.30 US retail sales, NY empire state manufacturing

-  14.00 ECBs Lagarde speaks