Any sign of a US debt limit agreement?

Good morning

A quick look at GBPUSD this morning shows it is almost exactly where it was this time yesterday, around 1.2450. In the meantime it has been down to 1.2420 and up to 1.2510, but now back to those mid-1.24s. EURUSD hasn’t seen quite the same range, stick between 1.0810 and 1.0850 most of the past 24 hours, now 1.0820.

GBP has made some gains against EUR, the pair now 1.1505 having been around 1.1465 yesterday morning. Remember that pivotal 1.1460/70 area I have mentioned several times before, having capped the upside since late last year and now seems to be providing support. Slightly hawkish comments from BoEs Bailey yesterday is a key reason behind this GBP strength, he said inflation remains far too high and more must be done by BoE to bring it back to target.

Elsewhere, USDJPY has pushed higher again, now 137.65. 138.00 This is a level we haven’t been above since Dec 2022 despite having been tested a few times since then. This area had acted as support for a month or so in late 2022 so I’d say we are at or near a rather critical level. Remember we got near to 152.00 last October so there could be decent room should we break higher.

I am finding yen very difficult to read at the moment. I’m trying to prepare for a bit of Yen strength but so far each time it looks like pushing higher, it surprises with a decent reversal. GBPJPY currently 171.40 for the record. Japan inflation numbers due overnight could be important here, a higher than expected reading could give yen a boost but BoJ don’t seem too concerned with inflation for the moment.

The general USD strength we have seen comes with hope of a resolution to the US debt limit crisis. Biden did mention some progress had been made after a productive meeting, possibly the most bullish comments we have heard on the matter, although really we are still some way from any agreement. Still seems incomprehensible that the US would not pay its bills. There have also been some feeling that the market is lowering its expectations of Fed rate cuts later in the year which is also helping USD.

The growing potential for Erdogan to be re-elected in Turkey has sent the Turkish Lira lower, USDTRY now up at 19.78, also helped by a bit of USD strength. Jan 2020 this pair was around 6.00 and all the way back in Jan 2010 it was more like 1.50. A very alarming depreciation which I occasionally use to demonstrate the fact that although some markets may appear stable, there always remains huge potential for significant moves.

Speaking of significant moves, today marks the 43rd anniversary of the eruption of Mount St Helens. I remember this event as a kid, I presume John Craven told me about it on Newsround, although I don’t think I ever really appreciated the true scale of the event. The eruption lowered the height of the mountain by about 400 metres and left a crater about one mile wide. The ash cloud circled the earth in 15 days.

A couple of days in and the exams are going strong although we did have a slight cause for alarm this morning when my youngest seemed to forget he had a GCSE to sit this afternoon, as we heard him planning to meet a friend what would have been mid-way through the exam. It was, I am assured, a genuine mistake…..

- 10.15 BoE monetary policy reports

- 13.30 US initial jobless claims, philly fed survey

- 14.05 Feds Jefferson speaks

- 23.45 NZ trade balance

- 00.01 UK GfK consumer confidence

- 00.30 Japan CPI

USD back in favour

Good morning

US dollar has pushed higher despite some disappointing retail sales numbers yesterday. GBPUSD and EURUSD have traded towards the start of the week lows, currently 1.2450 and 1.0850 while USDJPY is up at 136.85. Decent Japan GDP numbers overnight did nothing to help JPY, slightly odd as I’d have expected this to lead to renewed speculation that we could see some slight tightening from BoJ.

Fed officials speaking yesterday didn’t give much away, confirming they are still focussed on getting inflation back to the 2% target and that rates are not yet restrictive enough, although others added that time is needed to see the full impact of previous rate increases on the economy. Meanwhile US leaders continue to negotiate this debt limit but I’ve seen no major news from talks at the moment other than a tiny bit of hope that both sides see the importance of avoiding a default. Biden will be at the G7 meeting in Japan this weekend but has cut short his trip around Asia in order to continue talks.

USDCAD has had a busy week or two, ending April around 1.3650, trading down to 1.3315 last week before recovering to 1.3565 Monday. Yesterdays Canadian CPI pushed CAD higher helping USDCAD down to 1.3405 but it now sits 1.3500, dragged higher on this latest bout of USD strength,

No major data due today, EU inflation numbers are the final release and not expected to offer any surprises. We do have some ECB officials speaking and we’ll keep an eye on those for any clues as to their perceived rate path. Otherwise, I’m up in London for a few meetings today with some old clients and some (hopefully) new clients.

Finally, while I don’t like blowing my own trumpet, I had messages from a couple of new readers this week saying how they like the daily reports. One reader was from the North side of the Isle of Wight. The other was from the North Island of New Zealand. That’s truly a global readership.

- 10.00 EU HICP

- 10.00 ECBs Elderson speaks

- 10.30 ECBs Panetta speaks

- 10.50 BoEs Bailey speaks

- 13.30 US building permits, housing starts

- 00.50 Japan trade

- 02.30 AUS employment

- 03.00 NZ budget release

GBP slips after weaker employment data

Good morning

GBPUSD had pushed back above 1.2500 yesterday to reach 1.2535, but this mornings weaker than expected UK employment numbers sent the pair back to 1.2470, similarly GBPEUR backed off from 1.1515 pre-release to 1.1470 just after. EURUSD has been stuck pretty much in a 20 pips range between 1.0865 and 1.0885 since yesterday morning.

Reuters conducted a poll in which economists favoured two more rate rises from ECB but could see three more 25bps rises to take rates to 4%. Despite this, EUR has continued to struggle against GBP and USD since the ECB rate meeting on 4th May when GBPEUR was 1.1365 and EURUSD near 1.1100.

AUD slipped after the release of the RBA minutes and also again after disappointing China data overnight. GBPAUD traded up from 1.8680 to hit 1.8755 this morning, although the UK employment number wiped off most of those gains, the pair now back at 1.8700. GBPNZD also traded lower to 2.0000 after the UK data, although NZD doesn’t seem to have been impacted by the news Westpac are looking for NZ rates to hit 6% from its current level of 5.5%. AUDNZD has traded down from 1.0760 to 1.0695, some are looking to sell AUDNZD rallies looking for a possible test of the 1.061/20 area.

Erdogan will face a run off election in two weeks time, after he just fell short of the key 50% mark over the weekend. Erdogan must go into the run off as favourite having already won more of the vote than his nearest rival Kilicdaroglu, plus Erdogan is likely to pick up supporters from Ogan who has dropped out of the running having secured just 5.2% of the vote.

UK supermarkets are being investigated for artificially inflating food prices. There is also an investigation into supermarket pricing on fuel with evidence that some have increased their margins on petrol and diesel. No real surprise there. The same should be done for energy firms. I have said before that while i understand energy prices would rise, there does seem to be both a disproportionate rise in prices and a very slow decline in prices when the chance arises. I have also so far failed to find a satisfactory answer as to why they standing charges on energy bills have risen so sharply.

On the subject of rising prices, I see Centre Parcs has been put up for sale for around £5bn, or £12bn if sold during the school holidays. I saw that on Twitter, not suer who put it there but thank you to whoever I borrowed it from.

US retail sales today, for many this is the highlight of the week. We do also have some Fed official speaking today but we’ll be looking more closely on any news from Biden’s meeting with Congress leaders over the debt limit.

- 10.00 EU GDP

- 10.00 German ZEW

- 13.15 Feds Mester speaks

- 13.30 US retail sales

- 13.30 CAD CPI

- 15.00 Feds Barr speaks

- 17.15 Feds Williams speaks

- 00.50 Japan GDP

- 02.30 AUS wage price index

- 05.30 Japan industrial production