A bit of calm returns, but for how long?
A little calm seems to have returned the markets with equities slightly positive and less movement in currencies. GBPUSD is almost exactly where it was this time yesterday at 1.2335, EURUSD a touch lower at 1.0550 which leaves GBP a few points higher against the EUR at 0.8555 (GBPEUR 1.1690). Talk that UK is still looking at rescinding parts of the Northern Ireland protocol as early as next week does not seem to be adding pressure on GBP, although in turn a report by NIESR suggesting BoE will need to raise rates to 2.5% is not really offering much support. Eyes on UK data out early tomorrow morning.
Meanwhile Fed officials seem happy to keep raising rates in 50bps increments although I do still wonder if we’ll see a 75bps move at some point. Mester has said they will not rule this out, while Waller is keen to front load rates while the economy can handle it. Attention turns to US inflation numbers due out today is expected to show a slight drop in the headline rate from its previous reading of 8.5% to 8.1%, and in the core rate from 6.5% to 6.1%.
A large Swiss bank has changed it ECB rates forecast, now seeing a 20bps rise at the July meeting. Several ECB officials have hinted at this possibility and there has not been much in the way of argument from the more dovish members. Lagarde speaks this morning, be interesting to see if she has anything to say on the matter. Unlikely. Still talk of parity against USD doing the rounds, even with a July rate rise the ECB will, by then, be far behind the Fed. German inflation out this morning was bang in line with expectatons.
USDJPY trades just above 130.00 having been as high as 131.30 earlier in the week. A large US bank has said JPY could be as much as 25% undervalued against USD and believe Yen still has a place as a safe haven in times such as recessions. Not sure its quite time to sell USDJPY mind you but we may see gains in the pair limited
China CPI came in higher than expected overnight. Largely due to food prices, sending USDCNY lower from around 6.7350 to 6.7150, it fixed at 6.7290. WHO has said Chinas zero covid policy is not sustainable although numbers out of China show a fall in Covid cases in Shanghai, offering some hope that restrictions could be lifted in a few days.
Romania raised rates yesterday by 75bps to 3.75%, a move of 50bps had been widely expected and there had been some calls for a full 1% rise. The 75bps should keep both camps happy. Rates started the year at 1.75%, a string of moves has taken it up 2% since then.
TRY has weakened again, USDTRY trading up to 15.37 at one point before selling off to 15.24, now at 15.30. One large bank I speak to expects TRY to weaken further.
We talk of volatility in currency markets and we know energy prices have been moving around. Spare a thought though for metal traders. I met an old friend of mine yesterday who is something pretty big in the world of metals. He was explaining that back in March, Nickel, which had been trading around $25,000, flew higher to hit $50,000 and then on to $100,000 in the space of a couple of days, before plummeting back to $32,000 where it trades now. The moves led the LME to suspend trading and cancelled all trades made from a particular time, trading resuming a week or so later. I try to keep my eyes on other markets, not quite sure how I missed this.
- 09.00 ECBs Lagarde speaks
- 13.20 ECBs Schnabel speaks
- 13.30 US CPI
- 17.00 Feds Bostic speaks
- 19.00 US monthly budget statement
- 19.15 Biden speaks
- 22.00 NZ REINZ house prices
- 00.01 UK RICS house prices
- 00.50 Japan current account, BoJ summary of opinions
- 02.00 AUS consumer inflation expectations
- 04.00 RBNZ inflation expectations
- 07.00 UK GDP, industrial production, trade balance