Good morning

Another quiet day in the world of currencies yesterday although lower risk sentiment overnight has seen US dollar push higher, GBPUSD now down at 1.2180, EURUSD at 1.0475. Headline UK inflation came in at 9,1%, pretty much as expected, although the core reading, excluding energy and food, slipped a touch lower to 5.9%. EURGBP is up at 0.8615 as I type, (GBPEUR 1.1605), well off GBP’s recent highs

In the US, Goldman Sachs has put the chances of a recession next year at 30%, but forecasters still see Fed raising rates quickly, 75bps in July and 50bps in Sept. They do need to combat inflation but I also feel they want rates high so they can have room to reduce them if necessary.

Feds Powell delivers his semi-annual testimony to the Senate today and is likely to be asked about rates, inflation, and perhaps whether the Fed were well behind the curve when it came to taming inflation. Watch for any talk of the potential for a 1% rate rise. Meanwhile Biden speaks later this evening, it is expected he will cut tax on gasoline as prices continue to surge.

The push higher in USD has led USDJPY to new highs, hitting 136.70 overnight. We did have the BoJ minutes but they didn’t really offer anything of interest.

Gold prices are holding up well given the rally in USD, currently $1827/oz, while Bitcoin continues to struggle, sitting at just a touch over $20,000.

EU leaders meet tomorrow, not sure what the agenda is although I am sure Ukraine will be high up there. A lot has been said recently about the risk of Russia completely cutting off gas supplies this winter, plenty of talk about the likes of Italy and Germany stockpiling gas.

On this day, 36 years ago, we witnessed two of the most memorable sporting moments in history. The first was Maradonas ‘hand of god’ goal against England in the 1986 world cup, the second was in the same match, possibly the greatest world cup goal of all time when Maradona took on almost the entire England team from inside his own half all the way to Englands six yard box, where he duly tucked the ball away to score Argentinas second and put England out. It still hurts now.

- 09.40 BoEs Cunliffe speaks

- 13.30 CAD CPI

- 14.00 SNB quarterly bulletin

- 14.30 Feds Powell speaks

- 15.00 EU consumer confidence

- 15.40 BoCs Rogers speaks

- 19.00 Biden sepaks

- 23.00 AUS S&P manufacturing, services PMI

Good morning

A fairly quiet day in the FX markets yesterday, for the most part GBPUSD traded a 50 pip range and EURUSD an even tighter 30 pips range. ECBs Lagarde said the ECBs tools to deal with fragmentation will be effective, she also said July would see a 25bps rise to combat inflation which she says is largely down to high energy prices. Villeroy also talked of the new ECB tool to protect the Euro and smooth bond market moves, while ECBs Lane said if ECB raise rates 50bps in Sept it is not a sign of panic, just that negative rates may no longer be appropriate.

As I type EURUSD trades up to the range highs around 1.0540. Macron set to meet both far left and far right parties today following the loss of his majority in the weekend elections. Neither party will be too eager to work with Macron.

UK sees a train strike today which will likely cause a bit of chaos for many. As you know I am no fan of strikes and don’t think they should be allowed. I do wonder however whether this is the start of more widespread action, I’m sure I read somewhere that teachers and nurses could follow with strikes of their own. If I were a nurse looking at train drivers pay demands, I’d be thinking I’m more deserving. Personally I’d be annoyed to see train drivers pay increase over nurses.

BoEs Mann spoke yesterday, she had voted for a 50bps rate rise at the last meeting and seems eager to continue to push rates higher. She also mentioned the pressure likely to face GBP if ECB and Fed raise rates, and therefore the potential for higher inflation. She isn’t overly worried about protecting GBP, just wants to ensure inflation is dealt with as best as it can be. BoEs Pill speaks today, I don’t believe he voted for 50bps last time but has since said he might look at such a move next time.

GBPUSD up to 1.2300 and GBP makes small gains against EUR, now at 0.8575 (GBPEUR 1.1660). UK inflation numbers will be out early tomorrow morning, expected to remain around 9% on higher fuel and food prices, but perhaps a slight reduction in the core reading which excludes food and energy.

RBA minutes showed that further rate rises would be needed, 50bps rises were necessary given the low starting point but that 25bps increments would still give rapid tightening. RBAs Lowe also spoke, he ruled out a 75bps move in July but seemed uncertain of whether 25 or 50bps would be seen. Overall then, perhaps 50bps in July followed by 25bps rises seems most likely. AUD a touch lower than this time yesterday, AUDUSD 0.6975, AUDNZD 1.0975 and GBPAUD up to 1.7640.

USDJPY has had a fairly quiet session, mostly trading a range between 135.00 and 135.20 overnight. Not a particularly exciting economic calendar on offer today so maybe with people stuck at home with the sun shining, perhaps another quiet day is ahead.

- 08.15 BoEs Pill speaks

- 09.00 EU current account

- 13.15 BoEs Tenreyro speaks

- 13.30 US Chicago fed nation activity index

- 13.30 CAD retail sales

- 15.00 US existing home sales

- 23.45 NZ trade balance

- 00.50 BoJ minutes

- 07.00 UK CPI, RPI, PPI

Good morning

Thursday seems like a long time ago. The last message I sent reported a move in GBP after the BoE rate announcement, but through Thursday afternoon GBP pushed higher, GBPUSD reaching 1.24 and EURGBP almost touching 0.8510 (GBPEUR 1.1750). It has failed to hold onto those gains, now trading 1.2240 and 0.8600 (1.1630) respectively, but still above pre-BoE announcement levels.

I had also mentioned USDJPY last Thursday, a move that saw it trade down to 131.50 but through Friday it clawed its way back up to pretty much the recent highs around 135.50. Since come a little lower, 134.65 as I type, but something tells me we haven’t seen the end of Yen volatility. Elsewhere in Asia, PBoC kept rates unchanged, USDCNY dropped sharply lower from 6.7150 or so to 6.6700, while some interest in USDPHP which is trading higher to 54.00 despite talk of pending rate rises.

Euro has seen similar swings, EURUSD trading from 1.0380 to 1.0600, now 1.0520. ECB have again made it clear they will do all they can to limit panic in the bond markets, while Macron loses his majority with 245 seats with the far right National Rally winning 89 seats, double what they were really expecting. Macron will now have his work cut out with both the left and right likely to do their best to disrupt many proposed reforms.

AUD could be in for some excitement overnight with Gov Lowe speaking as well as the release of the RBA minutes. AUDUSD now 0.6980, AUDNZD 1.1000, GBPAUD 1.7505.

Major central banks, other than BoJ, have been hawkish recently, and Feds Waller made it clear another 75bps move in July is his favoured move if data comes in as expected, he’d probably have looked for a 1% rise in June but was concerned it would impact the market too much. He makes it clear there is a long way to go to reach neutral rates and even further to have a restrictive rate. He says his aim is to get inflation down. The problem he, and other central bankers face, is this high inflation with signs of weakening demand.

We have a host of central bank officials speaking today, including Lagarde this afternoon but as you know she rarely says anything that impacts the market, worth being on our toes though just in case. We also have BoEs Haskell and Mann speaking today, both voted for a 50bps increase at last weeks meeting so their comments may attract more attention.

So into the new week, its another US holiday today, they do seem to have more than their fair don’t they. At home, we have the sun shining which looks great although I have to say once again I struggled with a bit of hayfever Friday as I made my way round a couple of University open days with my daughter. However I mowed the lawn yesterday wearing a Covid mask which seemed to work wonders, no snivels at all. Could be the way forward. Just hope I don’t get an odd shaped tan. I did read that a new over the counter hayfever tablet is now available, was previously prescription only. If contains Fexofenadine, I’m tempted to give it a go. I’d be interested to hear from anyone who has tried it.

For some people, a rail strike this week will cause chaos. I’m not a fan at all of strikes and am surprised they are still legal. A strike on Tuesday, Thursday and Saturday means the whole week will be a nightmare, right in the middle of A levels. Shouldn’t be allowed. I’ve not bothered looking to see why they are striking, presuming they want more money, more pensions, more holidays. Yeah, don’t we all. I guess the only saving grace is that by now most people are more capable of working from home so I’m hoping the impact is slightly reduced and although not everyone has that flexibility.

- 09.00 BoEs Haskel speaks

- 10.00 EU construction output

- 11.00 German Buba monthly report

- 14.00 BoEs Mann speaks

- 14.00 ECBs Lagarde speaks

- 22.00 NZ Westpac consumer survey

- 01.00 RBAs Lowe speaks

- 02.30 RBA minutes