Trump's attack on Fed's Powell send US equities and US dollar lower

Good morning

Welcome back to the real world after a long and rather lovely long Easter weekend.  Another weekend of birthday celebrations in the Evans household, this time my wife’s.  Headed over the Battersea Power Station and the surrounding area, well worth a visit if you’re ever looking for something to do.  OK, its a shopping centre but pretty upmarket and there are some lovely bars and restaurants.  Very clever the way they have kept some of the original features of the old power station, and there is a life up inside one of the chimneys if you want another activity.

Had some more family and friends over, did some work in the garden, and before you know it I’m back at my desk wondering whats been going on for the past few days.  Well, Trump has been at it again.  This time he was attacking Feds Powell, referring to him as ‘Mr Too Late’ and calling him a major loser and explaining how inflation is already on the way down, rates should be lower and that the US economy could slow unless Fed cuts rates.  Trump is clearly setting the foundations for being able to place the blame for any US economic downturn squarely at the door of the Fed rather than from the turmoil left by his Liberation Day tariff plans.

We know Trump doesn’t like Powell, we know Trump wants lower rates and we know Trump thinks he knows more about the economy and monetary policy than the Fed does.  No surprises there.  But the markets took a dim view of the attack, the potential loss of independence of the Federal Reserve Bank after news broke that Trump was looking for a way to oust Powell, and weakness in the US economy is worrying investors.  With confidence low, US markets dropped heavily yesterday, ending the day around 2.5% lower, while the US dollar also traded sharply lower.

GBPUSD hit a high of around 1.3425, within a  whisker of levels seen Sept last year, we’d look back to Fed 2022 for higher GBPUSD levels.  EURUSD saw a high of 1.1570, the highest since Nov 2021.  Both pairs off those highs now, at 1.3385 and 1.1495 respectively, which puts GBPEUR around 1.1645.  USDJPY quite a mover, the pair broke below 140.00 briefly this morning, now back to 140.45, which leaves GBPJPY at 188.00. 

Gold continues to march higher, reaching a heady $3,500.  Oh those sales by Gordon Brown in the late 1990’s/early 2000’s look pretty criminal now.  I know hindsight is a wonderful thing, but I remember there being widespread unhappiness with not only the sale itself but the manner in which he did it, pretty much telling the market in advance of his plans, thereby sending prices lower still.  Price achieved for the 395 tonnes (around 12.5 million ounces) was just below the $300 mark. 

In other news, Putin has reportedly said he is open to peace talks with Ukraine, the first time I can remember him saying this.  I do fear that his approach will be ‘agree peace or we will send in those vast forces we are amassing for another full scale invasion’.   But hopefully the talks, should they take place produce some positive results.

Over Easter the Pope passed away, which could be seen as fitting for someone in such a high religious position.  It does make the Catholic Church’s 2025 Jubilee a little more complicated, as the process of both arranging his funeral and of course then finding the next Pope needs to take place.

Plenty of sport over the weekend, Liverpool have pretty much ensured their premier league title with a win over Leicester, while Spurs have pretty much ensured they’ll finish just above the relegation zone with a loss to Notts Forest.  It is getting interesting at the top of the table, with just three points separating five teams all looking for a Champions League spot, although with Spurs and Man Utd still in with a shout of the Europa League and Chelsea hopeful of raising the Europa Conference, there are many possible permutations of which teams will actually enter which tournaments. 

Of course, I have to congratulate both Leeds Utd and Burnley for assuring their promotion to the premier league next season, not the only question is which team wins the title.  Leeds are currently top on goal difference with just two matches left to play.  Sheffield Utd, who at one stage looked odds on favourites to go up, will have to settle for a play-off position, there are quite a few teams who could still take the last playoff place. 

The economic calendar today is mostly made up with Fed officials speaking, I wonder if any of them will be brave enough to speak about Trump’s latest outburst.  Tomorrow sees key PMI’s from UK, EU and US, while UK retail sales are out early Friday morning.  Meanwhile, will Trump be able to refrain from making any other market-busting comments?  I wouldn’t bet on it…

Have a great day…

-  14.30 Feds Harker speaks

-  15.00 EU consumer confidence

-  15.00 Feds Jefferson speaks

-  18.40 Feds Kashkari speaks

-  19.00 ECBs de Guindos speaks

-  23.00 Feds Kugler speaks

-  00.00 AUS manufacturing, services PMI

Feds Powell dismisses rate cuts but talk of trade deals brings some cause for optimism

Good morning

I don’t think anyone will be sad to see the end of this week and a four day long weekend will be most welcome unless of course you are one of the unlucky ones who has to man the fort over the bank holidays.  We do still have a full work day ahead of us before we can enjoy the holidays so now is not quite the time to put our feet up.

Equities were generally lower yesterday, US equities ended down around 1.5-3% after Feds Powell spoke and we had a very slightly higher USD, GBPUSD slipped from its highs around 1.3280 to 1.3205 overnight, bringing a halt to the rather persistent USD selling we’d seen so far this week.  Powell made it clear that Fed are willing and able to remain cautious and wait for any new information on jobs, inflation and the impact of tariffs before deciding any policy changes.  That is unlikely to please Trump who wants to see rate cuts.  Earlier, US retail sales data had little impact coming out pretty much in line with expectations although worth noting upward revisions to the previous month, GBPEUR is a few points lower at 1.1645.

One other thing Powell mentioned was how tariffs could weigh on US attractiveness to other countries.  EU’s von der Leyen has said that the ‘West’ no longer exists and talks of Trumps oligarchs who are making the rules.  She could well be right.  We know the US/Canada arguments that have taken place of the past few weeks, and Trump seeming to turn his back on Ukraine in favour of Russia did seem to bring home the differences between US and EU.  Therer is some hope though as Trump is meeting Italy’s Meloni today, while US’s Witkoff and Rubio will meet EU counterparts in Paris today to discuss Ukraine, following Witkoffs meeting with Putin last week.

Meanwhile though, Japan have seemed to make some progress with US in trade talks, and a White House insider has said the UK could see a decent deal within the next three weeks.  US deals with India and South Korea are likely to be announced first, along with Japan.  These deals are as much in the US interests as they are of other countries.  Ford has already said prices will rise in June or July unless tariffs are eased. 

GBPAUD is currently 2.0855, up from yesterday’s lows around 2.0710, I’ve not really looked at AUDNZD for a while but a quick glance shows it is now 1.0740, not far from last week’s lows around 1.0690 which in turn was the lowest we’ve seen for over one year.  This pair was above 1.1100 at the start of March, a pretty clear sign that AUD has lost ground during the tariff storm, partly due to its trade relationship with China.  Must be room for upside here if trade deals are starting to be struck although RBA are likely to cut rates next month, a 25bps cut is priced in, the question is whether they start looking at a possible 50bps cut.

The Canadians chose to keep their rates unchanged at 2.75% and CAD did strengthen as a result, USDCAD dropped to 1.3850 or so at one point while GBPCAD declined to 1.8315, suggesting a rate cut had been partially priced in to some extent before the announcement.  Macklem said that there is risk of considerable slowing in the economy, something rates alone cannot control.  He highlighted the uncertainty the tariff issue brings and made it clear that now is not the time to be too forward thinking, preferring to react quickly if necessary.

BBC had an article that caught my eye yesterday.  A Colossal squid has been filmed for the first time ever.  I clicked the link expecting to see something huge and terrifying.   As it turned out, it was a young specimen just 30cm long.  Not exactly colossal.  OK, it’s an important find but I must say I felt rather cheated. 

Another article that grabbed my attention was the banning of holidaymakers bringing meats and cheese into the UK from the EU.  I saw the headline and thought that we were on for an all-out trade war with the EU.  As it turns out, the ban is a temporary measure designed to prevent an outbreak here of foot and mouth disease that has been spreading on the European mainland recently. 

In sport, another superb display by Arsenal saw them overcome Real Madrid last night, beating the current Champions League winners 2-1.  Inter Milan also went through as they drew with Kane’s Bayern Munich, Inter’s lead from the first leg proving just enough to put them through.  Arsenal now face PSG, Barcelona play Inter Milan.

Of course the main European football matches take place this evening.  Spurs are away to Eintracht Frankfurt in the Europa League, the teams level after the first leg.  A loss for Spurs could well see the end of Ange’s reign while a win would keep him in the hot seat for another couple of weeks at least.  Man Utd play Lyon, score is also level after the first leg.  In the Europa Conference, Chelsea should stroll past Legia Warsaw this evening after winnig 3-0 in the first leg.  Chelsea remain firm favourites to win the tournament.   

Today bring the ECB rate announcement where a cut of 25bps is pretty much completely priced in, as a result I wouldn’t expect to see EUR weakness unless Lagarde says anything particularly new and dovish.  We do also have the Turkish rate announcement, rates are expected to stay unchanged at a whopping 42.5%.  GBPTRY is currently around 50.80 which should make life cheap for anyone heading there on holidays.  I say ‘should’ only because I know that both inflation and some profiteering means prices are not as low as you’d hope.

Looking ahead to next week, the key releases are EU, UK and US manufacturing and services PMIs, along with UK retail sales that are out early morning of next Friday.

I’ll take this opportunity to wish you all a very splendid Easter break, Mark and I will not be at our desks but you are still welcome to call Mark should you need anything over the long weekend!

Have a great day and a great long weekend if we don’t speak before.

-  12.00 CBRT rate announcement

-  13.15 ECB rate announcement

-  13.30 US Philly Fed survey, initial jobless claims, housing starts

-  13.45 ECB press conference

-  16.45 Feds Barr speaks

-  00.30 Japan CPI

GBP remains bid despite lower than expected inflation data

Good morning

Yesterday saw global equities recede a little after a couple of days of gains and futures prices point to a lower open this morning.  GBP remains well bid despite inflation coming in below expectations, led largely by lower petrol prices.  GBPUSD ticked up to 1.3280 this morning, quite a turn from the lows near 1.2710 just over one week ago.  GBP also remains bid against EUR, that pair now 1.1660, we’ve also got higher levels in GBPAUD and GBPNZD now 2.0920 and 2.2435 respectively.  This latest round of inflation numbers does go some way to support a BoE rate cut in early May.

Bank of Canada will announce their latest rates decision today.  There is a mixed feeling here as to whether they keep rates unchanged at 2.75% or reduce them to 2.5%.  The former probably still has the edge although softer than expected Canada inflation yesterday, plus concerns of a global slowdown and trade wars could see BoC making a pre-emptive cut.  CAD at six months highs vs USD could also offer room to BoC to cut.  USDCAD currently 1.3915, GBPCAD 1.8475.  Tempted to look at upside USDCAD trades just in case, perhaps the overnight 1.3950 usdcad call for around 30 cad pips…

Gold prices continue to push to record highs, reaching within a dollar or two of $3,300.  I still think China is behind the move but I’m sure funds are long the precious metal as well. 

EU seem to be making little progress in trade negotiations with the US, with the White House looking to not only discuss trade but also ways of ensuring countries reassess their economic ties with China.  China are ramping up the trade war, accusing the US of protectionism which is a bit pot/kettle if you ask me.  China have told their airlines to stop taking deliveries of Boeing planes and are also reducing the supplies of rare earth minerals the US need.   No wonder the US are so keen to get a deal with Ukraine.  They will be eager to do so before Russia start what many think will be a new, massive offensive.  The Times reports that Russia may also be ready to target NATO, accusing France, Germany and the UK of escalating the war in Ukraine.

Aston Villa fought back bravely against PSG last night in their Champions League quarter final but the two early PSG goals and a decent lead form the first leg were enough to see PSG through.  That last minutes goal by PSG last week did indeed come back to haunt Villa.  Barcelona are also through despite losing 3-1 to Borussia Dortmund.  This evening sees Arsenal looking to make the most of their 3-0 advantage over Real Madrid, that could be an interesting match if Madrid get an early goal.  Meanwhile, Kane’s Bayern will be trying to overturn a 2-1 deficit with Inter Milan.

Today brings EU inflation and US retail sales as well as the BoC rate meeting.  Feds Powell speaks later this evening and we’ll have NZ CPI and Aussie employment data from our friends down under.

Have a great day…

-  10.00 EU HICP

-  13.30 US retail sales

-  14.15 US industrial production

-  14.45 BoC rate announcement

-  15.30 BoC press conference

-  17.00 Feds Hammack speaks

-  18.30 Feds Powell speaks

-  23.45 NZ CPI

-  00.00 Feds Schmid speaks

-  00.50 Japan trade balance

-  02.30 AUS employment