Approaching end of Q1, Trump's 'Liberation Day' looms next week

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 recently. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

We change our clocks this weekend so all back to normal next week.

There seems to be a bit of a lull ahead of Trump 2nd April ‘Liberation Day’, as the world awaits any more tariff news.  Equity markets were generally lower yesterday, the UK’s FTSE100 was among the best performers, just 0.15% lower.  EU and Canada continue to rile Trump as the backlash from tariffs and possible trade wars push the two closer together, at the expense of the US.  Carney has made it very clear that the historic relationship between US and Canada is over but that he’ll be speaking to Trump in the next day or two.  This isn’t going quite as Trump planned, I don’t think.

GBP continues to perform well, currently 1.2950 and 1.2015 against USD and EUR, it is also looking strong in the crosses, now 2.0550, 2.2625, 1.8540 and 194.75 against AUD, NZD, CAD and JPY respectively.

Ukraine is nowhere near peace, I had feared it all looked too good to be true and with unreasonable Russian conditions on a ceasefire and reports of an attack on Ukraines energy infrastructure, something they had agreed not to attack, we are surely no close than we were a week or two ago.  US are still talking about Greenland, Vance is there and Putin has stirred the pot by saying he believes US are serious about taking Greenland.  Putin also said that Russia would stand up to any other nations who seemed to be interested in taking some control over the arctic. 

Trump has said Ukraine should hand over more minerals and oil in exchange for a ceasefire, with Trump looking for at least US$100bn plus interest.  This deal would include no guarantees of security.  Meanwhile Starmer is said to be sending military chiefs to Ukraine to help draw up ceasefire plans.  I can see a situation where US abandons Ukraine support and Europe is left to stand up to Russia.  What happens if Trump doesn’t get his minerals remains to be seen.

Australia’s PM Albanese has called an election on 3rd May, as had been talked about recently.  Also from Australia, a poll of economists has suggested RBA will hold rates next week but cut again in May.    

Core PCE is the key release today from the US, one that does have market-moving ability.  A softer than expected number could see USD end the week on a low although I think traders will be wary of putting on new positions into next week. 

Next week brings the end of Q1.  I have to say this first quarter has gone pretty quickly, in which time we’ve seen GBPUSD down to 1.2100 and up to 1.3000, EURUSD from 1.0200 to 1.0950 and USDJPY from almost 159.00 to a low below 147.00.  Hats off to gold though, which has seen a rally from around $2,600 up to record highs this morning of around $3,085. 

No premier league action this weekend but we do have four FA Cup quarter finals to enjoy.  Some say the magic of the cup isn’t what it used to be but the fans of the eight clubs remaining wouldn’t agree, especially those of Preston North End who have done a great job of making it this far.  Quite an achievement.

I have an achievement of my own to share.  I have finally finished all five series of Breaking Bad.  I’m not sure how long it has taken us to get through, certainly around the six month mark at least.  Many say it is the best TV series of all time while I also know a lot of people who just couldn’t get through the first series.  I’m torn, it was a real struggle at times and we put it down for a while to watch other things which I don’t think is a sign of a good, gripping show.  Anyway we got through it and I don’t think I could recommend it to anyone who asked.  Still, there are a couple of spin-offs such as ‘Better Call Saul’ and ‘El Camino’ in case I ever feel the need to dip my toe in again.  Save that for a rainy day.

Have a great weekend as and when it comes.  Looks like we’re in for some good weather next week. 

Don’t forget the clock change…..

-  10.00 EU consumer confidence

-  12.30 US Core PCE

-  12.30 CAD GDP

-  13.00 ECBs Nagel speaks

-  14.00 US Michigan sentiment survey

-  16.15 Feds Barr speaks

-  19.30 Feds Bostic speaks

Trump upsets markets with auto tariffs

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.

Chancellor Reeves’s spring statement came and went with little fuss yesterday but there is growing feeling that she will need to riase taxes in the autumn if she is to stay within her own fiscal rules.  GBPUSD traded a touch lower as she spoke but only to 1.2880 or so and spent the rest of the day between there and 1.2900.  A bout of tariff-related USD buying into the NY close took the pair down to 1.2865 but we have seen a mild turnaround overnight and as I type GBPUSD is at 1.2910.  GBP continues to find support against EUR, with GBPEUR just a few pips off 1.2000.

ECBs Centeno said there seems no reason why ECB would pause rate cuts at the April meeting.  ECBs Kazaks was the latest ECB official to talk of possible further rate cuts but did stress that uncertainty remains very high, predominantly due to the geopolitical situation.  We hear from several ECB officials today including Lagarde but I’d be surprised if we hear anything truly out of the ordinary.

Equity markets took a dislike to Trump’s announcement of tariffs on auto imports yesterday, although UK’s FTSE stood out as one of the few indices in positive territory, presumably the disappearance of most of the UK’s car manufacturing brands means we are less impacted than others.  Trump has warn Canada and EU that they will face consequences if they work together to harm US interests.  Canada and EU have certainly looked closer in recent weeks as Trump looks to clamp down on both countries.

In Ukraine, Zelensky has said he hopes US don’t back down to Russian demands over the removal of sanctions before a ceasefire can take place.  France’s Macron has also said it is too early to talk of any lifting of sanctions, with the EU rejecting such a move without a complete Russian withdrawal.  He also said that Russia can have no say in how Europe supports Ukraine in the future,  Peace is a long way off.  Meanwhile US say Ukraine are reviewing an economic proposal that could be signed off within a week or so.

Other than the ECB officials speaking today its really only the US data to look out for.  Q4 GDP will be released, I believe this is the third estimate so mildly less interesting than the provisional release.  Jobs data in the form of initial claims is also released.  Meanwhile, we’ll all be on the edge of our seats waiting for the to see if we get the next instalment in the Trump tariff saga.  UK retail sales and GDP will be out early tomorrow morning.

Have a great day….

-  12.30 US GDP, personal income/expenditure, initial jobless claims

-  13.00 ECBs de Guindos, Villeroy speak

-  14.00 US pending home sales

-  17.40 ECBs Schnabel speaks

-  18.05 ECBs Lagarde speaks

-  20.30 Feds Barkin speaks

-  23.30 Japan Tokyo CPI

-  07.00 UK GDP, retail sales

GBP down as UK inflation slips lower, next up Rachel Reeves

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.

I’d suggested we might see a quiet day yesterday and indeed that was broadly the case. GBPUSD saw fairly tight ranges between 1.2935 and 1.2960 through most of the day, this morning that range has been broken to the downside after the UK inflation release showed prices had dropped by more than expected to 2.8% from 3% last time, with core CPI dropping to 3.4% from 3.6%.  Good news, but still well above target and widely expected to pick up again later this year as the impact of the October budget take effect.  GBPUSD is a smidge below 1.2900, an area we have tested a few times this week already, while GBPEUR, which had touched 1.2000 just before the release, also fell, currently standing at 1.1955.

ECB’s Villeroy has said ECB rates could fall as low as 2% by September. Meanwhile Trump has voiced unhappiness with the EU, following on from the rather derogatory comments made on the leaked group chat earlier in the week.  Trump has said the EU is a freeloader and has acted terribly with regard to trade with the US.  Elsewhere, Vance will be travelling to Greenland, a trip officials in Greenland have called disrespectful, as the US continue to talk about taking the country out of Denmark’s hands.  I’m not sure Vance is the right guy to go schmoozing.

There was some excitement over headlines that Russia and Ukraine had agreed to a ceasefire in the Black Sea which will allow safe transit for commercial ships in the area.  However it seems that Russia have added some conditions to the deal, including reconnecting some Russian banks to the Swift payment system, which are unlikely to be met.  Trump has said it is possible Putin will drag his feet on ceasefire plans, which shouldn’t come as a surprise to anyone.

Aussie CPI overnight came in lower than expected which sent AUD a touch lower but it is the threat of tariffs that remains the biggest driver of AUD right now.  AUDUS traded down from 0.6310 to 0.6280 overnight but has since lifted to 0.6320.  GBPAUD is just around 2.0400 having seen a spike overnight up to 2.0580, half of those losses coming since the UK inflation release.

It’s another sparse economic calendar today, US durable goods the key release along with a couple of Fed speakers.  At 12:30 we’ll hear from Chancellor Reeves who is expected to announce spending cuts in order to meet the government’s own ‘non-negotiable’ fiscal rules without raising taxes .  With the OBR likely to cut growth forecasts there is a concern that these self-imposed fiscal rules may need to be broken, which of course wouldn’t go down very well at all.  Rising borrowing costs for the government are a real worry, hopefully we won’t see a repeat of the Truss/Kwarteng debacle back in late 2022.

Have a great day…

-  10.00 ECBs Villeroy

-  12.30 UK spring statement

-  12.30 OBR forecasts

-  12.30 US durable goods

-  14.00 SNB quarterly bulletin

-  14.00 Feds Kashkari speaks

-  14.10 Feds Musalem speaks

-  18.00 ECBs Cipollone speaks