Survived the first quarter.....

Good morning

Welcome to the end of the month and indeed the end of the first quarter of the year. That’s gone pretty quick. It really feels as though we have got away with what could otherwise have been a pretty horrific time. Global stocks are generally in positive territory and futures prices suggest we’ll have more upside when markets open.

The US dollar weakness continues, GBPUSD actually traded up to 1.2420 overnight, EURUSD to 1.0925, both are off those highs, now 1.2380 and 1.0895 respectively, but still at the upper end of recent ranges. In GBPUSD, the 1.2440 area has been tested a few times since mid-Dec and has held each time, we need to go back to June 2022 to see higher levels. An important area to watch. This mornings very slightly improved UK GDP has had little impact on the markets.

EU inflation out this morning, a strong reading could push EURUSD towards 1.10 but that area is likely to remain out of reach for now. As always around month-end we hear of the potential for erratic flows which could perhaps increase the chances of some volatility.

South Africa surprised the markets yesterday with a 50bps interest rate rise, against an expected 25bps, as they upped their inflation forecasts. This sent ZAR higher with GBPZAR trading sharply lower from around 22.35 to 22.00, currently 22.10. The vote was a close 3-2 in favour of 50bps, far from a unanimous decision.

Finland has gained NATO membership as Turkey votes in favour of admitting the country to the pact. This comes as reports Russia is looking to draft another 150,000 soldiers ahead of what must surely be another major push in Ukraine although some think they will be used simply to hold ground in East Ukraine rather than make further gains. Some reports put that number up around 400,000.

In other news, Trump is making the headlines as he becomes the first ex-US President to face criminal charges. They stem around his hush-money payment to Stormy Daniels. The payment of $130,000 was allegedly to cover up an affair back in 2006 and is not itself illegal. However Trump put the payment down to legal fees. Falsifying business accounts is a criminal offence in New York, and there is talk he is facing for than 30 charges for business fraud so one thinks there must be more to this than just a $130k payment.

I am not defending Trump, but this is surely pretty small-fry from people who I think would try to find anything to charge Trump with. Therre must be many other businessmen and politicians who have done the same and got away with it. Doesn’t make it right I know. Ms Daniels had signed an NDA which she then broke. I’m not sure what the law says about that.

Sticking with the US and some legal issues, Disney and Florida Governor De Santis have been having disagreements with De Santis determined to gain more control over the Disney theme park areas which have their own tax regime. De Santis appeared to be winning until it transpires Disney have used a legal clause which dates back to 1692 in an agreement which extends its terms until ’21 years after the death of the last survivor of the descendants of King Charles III’. That will obviously be some time. De Santis is not impressed and has vowed to seek a way round the clause, Disney say it is entirely legal. Conspiracy theorists would have a field day if anything happens to members of the Royal family from now on.

Have a splendid weekend. Looks like we’ll have to put up with this rain for another day or two but its possible Monday brings some sunshine with it. For those commuting, kids are now on school holidays so roads and trains should be quieter for the next couple of weeks.

- 10.00 EU HICP, unemployment

- 13.30 Core PCR, personal income/spending

- 13.30 CAD GDP

- 14.45 US Chicago PMI

- 15.00 US Michigan sentiment survey

- 20.05 Feds Williams speaks

- 22.45 Feds Cook speaks

AI won't yet tell me which way GBPUSD goes....

Good morning

The uneasy calm continues although with each day it seems to become less uneasy. US and UK stocks had a decent day yesterday, Asian markets were a little more mixed. EUJRUSD and GBPUSD not far off levels seen this time yesterday morning, currently 1.0830 and 1.2330 respectively, GBPEUR back up towards the 1.1400 area.

BoEs Mann said yesterday that the job of central banks will become very difficult with inflation likely dropping due to lower gas prices but core good and services still trending higher. This potentially means rate rises even if headline inflation looks like its coming lower.

So for now we see some fairly stable currency markets but Bloomberg says a report by Bank of America suggests volatility could be just around the corner. I’ve not seen the report yet myself so only know they talk of a possible liquidity crunch but have no further details. Still plenty of interest in longer term downside USD trade ideas based largely on lower peak in Fed rates. Bear in mind though the recent adjustment in Fed forecasts seemed largely based on a possible banking crisis. If this is averted, will we see those higher peak rate forecasts return?

An interesting report from CITI looks at CHFJPY, currently 144.25, they see potential for this to drop to the 130 area. They have been bullish about Yen for a while, although it has lost a bit of its safe haven status in recent times. They see potential for this to return, particularly if the USD does fall out of favour. Another one to watch with interest. We do have data out of Japan overnight but these long yen ideas are more longer term so shouldn’t be affected.

As the Russian invasion of Ukraine continues, Finlands NATO membership could take step nearer become reality as Turkey vote today to approve their membership. Turkey have had a bit of a test recently, being friends with both Putin and the West, and no doubt pressure will have been on them from Russia to veto the membership.

US GDP is out this afternoon, UK GDP early tomorrow morning. These are the latest Q4 readings and are not expected to have moved from previous levels. Several Fed speakers on the calendar as well but I reckon they’ll be doing their best to no upset the apple cart before month and quarter-end.

Just in case things get a bit quiet, I’m very interested in this ChatGPT AI stuff. I did go onto their website and asked it the question ‘will GBPUSD go up or down’. It came back with an answer that looked very much like an email risk disclaimer along the lines of ‘GBPUDS can be influenced by many factors...’ and ‘speak to a financial advisor before making investment decision..’. I pushed it to take a guess but it told me it does not guess or provide speculative information and that I should consider all information before making any decisions.

At the moment we are used to believing everything we read online and we rarely question anything on Wikipedia. There seems little doubt this AI stuff will become increasingly relied upon in the future and it will become harder to distinguish human online conversation from and AI alternative. I think the government have released a white paper on AI technology and regulation, what a minefield that could be.

- 09.00 EU economic bulletin

- 10.00 EU consumer confidence

- 13.00 German HICP

- 13.30 US GDP, core PCE, initial jobless claims

- 18.45 Feds Barkin speaks

- 19.00 Feds Kashkari speaks

- 20.45 US TreasSec Yellen speaks

- 00.30 Japan unemployment, Tokyo CPI

- 00.50 Japan industrial production, retail trade

- 02.00 China non-manufacturing PMI

- 04.00 Feds Waller speaks

- 07.00 UK GDP

Markets continue to show signs of calm into month-end, can it last?

Good morning

Equity markets show signs of calm as the panic over Deutsche Bank last week seemed to stem from one CDS trade. While this may be a good thing for now it does show how stocks prices of multi-billion dollar firms can come under pressure from one trade in a relatively illiquid instrument. Credit defaults swaps are supposed to be about mitigating risk, or rather passing the risk from one entity to another, they should not increase volatility of the underlying.

US dollar is still close to its recent lows, EURUSD at 1.0825 and GBPUSD 1.2320. BoEs Mann speaks this evening. AUD moved a touch lower overnight on weaker CPI. I didn’t see that on my calendar. It is possible RBA will look to keep rates unchanged at 3.6% at their meeting next week as a result of the inflation print.

JPY was a bit weaker overnight as Kuroda confirmed he thinks monetary easing has boosted the economy and that the benefits of the program exceeded the costs. He added that they were getting closer to the 2% inflation target but still had a way to go. Kuroda has just about one more week in office until he is replaced by Ueda. Regardless of Ueda’s recent comments, his appointment will bring more uncertainty to the path of BoJ policy.

Markets are quite excited about the surprise news that Chinese firm Alibaba is looking to split into six entities which was partly responsible for the near 2% increase in the Hang Seng overnight. This restructure is likely to go some way to appease the China government who have previously criticised online firms such as Alibaba.

The SNP members have voted Humza Yousaf as their new leader to replace Nicola Sturgeon. I’d looked the odds a while back and Yousaf was a bit of an outsider, with his two rivals Regan and Forbes ahead of him at the bookies. Yousaf has since been confirmed as Scotland’s new First Minister. He becomes the first Muslim to lead a major UK party

The BBC website yesterday had some quite incredible footage of London’s super sewer, a 25km long, 7m diameter tunnel underneath the Thames that is due to be finished in 2025. It will provide much needed help to the Victorian sewers London still relies on. Let’s hope the new one lasts as well as the old ones have.

Make a note in your diaries for 23rd April. The government have announced they will send an emergency alert test message to all mobile phone users in the UK. The system will be used to alert citizens of life-threatening situations. We are not the first country to adopt such a system and it does make a lot of sense to have a rapid way of contacting the vast majority of the population. False alarms are going to be a bit of a problem though, as and when they happen which surely they will.

- 13.00 SNB quarterly bulletin

- 15.00 US pending home sales

- 17.30 BoCs Gravelle speaks

- 19.50 BoEs Mann speaks

- 21.45 NZ building permits