Will Putin go along with US/Ukraine ceasefire suggestions?

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.

UC CPI inflation came in lower than expectations yesterday which sent USD lower although the move was short-lived   GBPUSD reached a high of almost 1.2990 while EURUSD climbed to 1.0930.  Both pairs are off those highs now, EUR has certainly come off worse, perhaps due to tough trade talk from both US and EU, perhaps also due to Putin’s reported reluctance to agree to the ceasefire that has been discussed by US and Ukraine.  Indeed, Putin has stepped up efforts to take back control of the Kursk region that Ukraine has held for some months.  A US team are heading to Moscow for talks, Trump has threatened Russia with serious consequences should they not play ball, but as I have said before, the days of US being able to tell other nations what to do have passed.  I think we’ll see Russia stepping up attacks on Ukraine before any lasting peace deal is agreed.

With Euro dropping fast than GBP, GBPEUR is well off recent lows which came in around 1.1835, now trading at 1.1915.  France have lowered their 2025 growth forecast from 0.9% to 0.7%, they also see inflation coming in weaker than expected, partly due to lower regulated electricity prices.  Interesting given I have just received a message from British Gas confirming a near 10% price increase for my gas and electricity.  Thanks for that.   

The relative GBP strength comes just about two weeks before OBR publishes their latest forecast for the UK economy.  They are highly likely to confirm Chancellor Reeves will miss her key fiscal targets by well over £1bn, a number that would reportedly be almost doubled if more current borrowing costs were used.  Expect Reeves to announce spending cuts in an effort to plug the gap.

BoC cut rates by 25bps to 2.75% yesterday, a move that had been widely expected.  This is the seventh cut in the current cycle.  BoC said they are concerned about slowing domestic demand in Q1 and also worry that the trade conflict could disrupt the weakened economy further and also impact the jobs market.  Overall, it’s a pretty dismal outlook but Macklem was clear that the Bank will need to tread carefully with regards to further rate cuts as they will likely need to find a balance between lower growth and the risk of rising inflation.  USDCAD trades now at 1.4385, tariff talk still the driving factor here for the time being.

I mentioned the North Sea tanker collision earlier this week, questioning whether the collision was an accident or deliberate.  I think I have read somewhere that most of the crew of the Portuguese registered Solong were Russian.  Including the captain who has since been arrested.   Naval experts have said it is a mystery how the Solong managed to hit the Stena Immaculate given the sophisticated equipment on board ships these days.  Curious stuff.

In sport, Arsenal and Aston Villa are both through to the quarter finals of the Champions League.  Arsenal have been drawn against Real Madrid, Villa will face PSG.  At this stage of the tournament there are no easy matches, there are eight strong teams remaining, but no one wants to face Real Madrid.  There was some controversy in the Real v Atletico match yesterday.  It went to a penalty shoot out that Real won after Atletico had one of their penalties disallowed due to the ball being hit twice by Alvarez when taking his spot kick.  He slipped as he was taking it and VAR said he kicked the ball onto his standing foot before it hit the back of the net.  The rule is correct but I have seen the video and I didn’t think it conclusive.

Spurs are in action in the Europa League this evening as they attempt to overturn a one goal deficit from the first leg.  Spurs are favourites at the bookies to both win and qualify. I wish I shared their optimism.  Man Utd, struggling like Spurs in the league this season, are also playing in the Europa League this evening against Real Sociedad, scores level after the first leg.  Chelsea will be hoping to retain their one goal advantage in the Europa Conference League match this evening against Copenhagen.

US PPI inflation is the main economic release out today, markets are expecting a slight drop from last month as we saw with CPI yesterday.  UK GDP is out early tomorrow morning but trade tariffs are still very much the main talking points for the time being.

Have a great day…

-  09.50 ECBs de Guindos speaks

-  10.00 EU industrial production

-  12.30 US PPI, initial jobless claims

-  21.30 NZ business PMI

-  07.00 UK GDP

-  07.00 German HICP

Markets dislike Trump's on-off tariff talk

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.

Trumps on-off tariff policy continues to unsettle the markets.  US equity markets dropped once again as Trump continued his war on trade.  Yesterday he said he would impose an additional tariffs on Canada in response to Ontario’s electricity price increase.  He also said he would shut down automobile manufacturing in Canada.  USDCAD traded to 1.4520 as incoming Canada PM Carney said the tariffs are an attack on Canada and that they will not back down until the US shows some respect and commits to free trade. 

Some backtracking followed on both sides, Trumps team saying no new tariffs had actually been signed, and then Ontario’s Ford said he would not move forward with his price increases.  USDCAD fell to 1.4380, however it is back up at 1.4450 as Trump failed to confirm the tariff reversal.  Separately, BoC meet today, a 25bps cut to 2.75% is widely expected, something of an insurance policy against a possible trade war.  A 50bps cut had, for a while, been touted a while ago but the market sees this as just an outside chance for now.  I’m not so sure, and wonder whether an overnight 1.4500 usdcad call could be a decent bet at around 20 cad pips. 

The EU have said they will restore tariffs on certain US goods, and impose some new tariffs, from 1st April in response to US actions.  Also in Europe, the Portuguese government has collapsed after the PM Montenegro lost a confidence vote following allegations of corruption in his family business.  Another general election, the third in three years, will take place.  Montenegro came into power in March 2024 after the previous PM, Costa, stepped down after an investigation began on certain members of his administration.  Costa didn’t disappear off the scene mind you, he is now the President of the European Council. 

Trump imposes and then reverses tariffs at such a rate it is difficult to know what is actually in place, what may come into place and what is unlikely.  Tariffs have been met with disapproval at home and abroad.  US business owners and lawmakers have reportedly been calling the White House demanding action is taken to calm markets by having a more focussed and predictable tariff agenda.  Meanwhile Australia has said tariffs are unfriendly and entirely unjustified. 

USDJPY had a bit of a volatile day, trading down to 146.55 early on Tuesday morning but has since rallied to 148.60.  Difficult to put a finger on what was behind the move other than the same uncertainty over the global economy.  I’d have expected to see some comment on interest rates perhaps, but I haven’t seen any talk suggesting an interest rate rise in June or possibly July is less likely.  Slightly lower wage increases from car manufacturers may also have impacted JPY. 

After talks with US in Saudi Arabia, Ukraine has said it is ready for a thirty day ceasefire, which now leaves the ball firmly in the Russian court.  I still cannot see Putin just stopping, but lets hope I am wrong and that some peace negotiations can begin.  US have reopened access to their intelligence for Ukraine, and minerals negotiations are soon to take place.  Trump thinks he may speak to Putin soon.  The hopes for some sort of peace pushed EUR higher, with EURUSD reaching a high of 1.0945 (now 1.0920) and GBPEUR down to mid-1.18’s.

US CPI is out this afternoon, perhaps not the key driver at the moment but expectations are for headline to drop 0.1% to 2.9% and core to also drop 0.1% to 3.2%.  We’d probably need to see a larger decline to really impact the US dollar.   Also on the calendar is a Fed official speaking which is rather odd given we are int eh Fed’s blackout period ahead of next weeks rate meeting.  Perhaps I’ve got that wrong.

In sport, Liverpool were dumped out of the Champions League as they lost to PSG on penalties.  Arsenal and Aston Villa are in action this evening, both teams holding a decent goal advantage from the first leg.  Leeds Utd play tonight as well after both Sheffield Utd and Burnley could only manage draws in their matches last night. 

I feel a little sorry for race-goers as Cheltenham enters its second day.  It perhaps started one week too late given the impressive weather we had last week.  I have seen reports of snow in Cheltenham today, let’s hope it warms up for the racing. 

Have a great day…

-  12.30 US CPI

-  13.45 BoC rate announcement

-  13.45 ECBs Nagel speaks

-  14.30 BoC press conference

-  15.15 ECBs Lane speaks

-  17.35 Feds Musalem speaks

-  18.00 US monthly budget statement

-  00.00 AUS consumer inflation expectations

US equity markets hit the hurdles, let's hope the Cheltenham runners don't

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.

US stocks dropped sharply yesterday after warnings from Trump that the US economy may experience something of a ‘transition’.  It seems clear his tariffs will push inflation higher, although Trump hasn’t said as much, nor has he confirmed whether the US could be facing a recession.  Both DJIA and S&P500 were down 2% and 2.7% respectively, while Nasdaq dropped 4%.  European markets were also lower, not quite to the same extent as the US markets, although futures pricing suggests a positive opening this morning.  US 10 year bond yields are lower as markets price in more Fed rate cuts.

This equity price drop will not please Trump at all, who would have been hoping his pro-US stance would boost the US markets, and he now has to accept that even if this does prove to be true, it will take some time to materialise.  The opposition to his tariffs, both domestically and overseas, has been harsher than he probably expected.  For example, Ontario have announced a 25% increase in electricity prices to all power exported to three US states, and has threatened to turn off supplies altogether.  Trump has warned Canada that US will ‘get it all back’ come 2nd April.  USDCAD is just above 1.4400 as I type, having been up to 1.4470 overnight after yesterdays London close.

The price move won’t please Elon Musk either, his Tesla share price dropped some 15% yesterday in a move that many regard as backlash against his political involvement, leading Trump to defend Musk against ‘left lunatics’ and says he’ll buy a new Tesla today in a show of support.  Musk has confirmed that Twitter (I will never get used to ‘X’) has also been attacked, this time by hackers in an attempt to bring the platform down.

The US dollar dropped yesterday, GBPUSD slipped back to 1.2860 while EURUSD hit a low of 1.0805.  Both pairs are higher, GBPUD now just a touch above 1.2900, EURUSD just a few pips short of 1.0900.  Worth noting the relative strength of EUR.  GBPEUR has hit a low this morning of 1.1850, quite a shift from yesterdays highs around 1.1940 and a move that has certainly taken me by surprise.  We know the German government 10 year bond yields move had dragged EUR higher early last week but it has been relatively stable since then.  The Green Party rejected Merz’s finance package that would have enabled billions of Euros in defence and infrastructure spending, but there has since been some headlines suggesting a deal could be agreed this week. 

Perhaps the hope of a Ukraine ceasefire is helping the prop of the single currency.  US SecState Rubio has said Ukraine will need to concede some territory for a peace deal, whether this means territory already lost or more territory on top of that remains to be seen, but I’d imagine Putin would want more than he currently has and Trump would most likely give it to him.  A Trump envoy, Witkoff, is said to be travelling to Russia to meet Putin, the first face-to-face meeting between US officials and Putin since 2021 when Biden met the Russian leader in Switzerland.  Meanwhile Moscow has been hit by a drone attack from Ukraine overnight, Russia says it shot down or intercepted all 337 drones that were launched. 

USDJPY was down at 146.60 overnight.  It is now 147.10, talk is that the next BoJ rate rise will come in June. BPJPY trades just around 190.00.

In other news, a collision between a tanker carrying jet fuel for the US military, and a large container vessel, has led speculation as to whether the collision was deliberate, indeed whether the Portugese registered Solong had been hacked into.  I’m not sure if this is possible, but I think back to the mysterious events surrounding the US container ship ‘Dali’ when it hit the bridge in Baltimore last March having lost all power. 

Liverpool are in action in the Champions League this evening, carrying a one goal advantage into their tie with PSG after the first leg.  Meanwhile, Sheffield Utd and Burnley could both go above Leeds in the Championship table if they win their respective matches this evening.  Burnley still have this incredible record of only having conceded ten league goals from the 36 matches played so far.  Quite amazing.  

A very light calendar today, just US JOLTS jobs data, but attention will be focussed on US equity markets and Ukraine peace talks.  In case it’s a quiet day, Cheltenham starts today and Constitution Hill, unbeaten over hurdles, is odds on favourite to win the 16:00 having won the race back in 2023.  It missed last years race due to illness.  I have no tips to offer I’m afraid and I’m out and about for much of the day so probably won’t get much of a chance to watch it. 

Have a great day……

-  14.00 US JOLTS job data