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  • richard evans

Ad-hoc ECB meeting today helps EUR

Good morning

US dollar continued to push higher yesterday, GBP was by far the biggest loser, trading down to below 1.2000 to 1.1935 at one point, levels not seen since March 2020 when Covid lockdowns were announced. It recovered slightly overnight to 1.2040 but now sits 1.2020. EURUSD was also lower but just managed to hold above 1.0400, but a move back up to 1.0480 this morning means EURGBP is at 0.8720 (GBPEUR 1.1470), matching the lows for GBP back to April 2021.

What led to EUR rally? Perhaps it was ECBs Schnabels comments that ECB will help the more vulnerable EU nations who face soaring borrowing costs that has helped EUR. Lagarde speaks later today, see if she gives any clues as to size of move expected next month.

EUR really buoyed by reports of an ad-hoc ECB meeting that is due to take place today where they will discuss the recent rout in the bo9nd market and perhaps look at steps to limit talk of fragmentation and deal with bond spreads between Germany and some of the more indebted nations. I believe the meeting is 10.00am london time, but not sure what time we should expect to see some news from that.

China numbers overnight were better than expected, even the drop in retail sales wasn’t as bad as had been forecast. Still some talk of US removing tariffs on China products, more in an attempt to ease inflation rather than to help China trade.

USDJPY traded up to 135.50 overnight, surpassing the Jan/Feb 2002 highs, indeed I believe we go all the way back to October 1998 to see levels higher than that. It has fallen back to 134.65 but with limited verbal intervention from Japan and FOMC announcement pending, another push to the upside looks more than possible.

FOMC rate announcement later today, we wait to see whether Fed raise rates 50, 75 or 100bps. For me 75bps seems to be the favourite for now given the higher US inflation numbers released last week. We will also get updated economic forecasts from the Fed, including the ‘dot plot’ which is likely to indicate much higher rates through the next couple of years than was suggested last time round.

Incredible innings from Jonny Bairstow in the cricket test match against NZ yesterday which saw him so close to breaking the fastest test century ever by an England batsman. His innings helped England secure victory. Shame the England footballers couldn’t follow suit. A dismal display saw them lose 4-0 to Hungary, I’m sure I read that this is the worst home defeat for 94 years.

- 10.00 ECB ad-hoc meeting

- 10.00 EU industrial production, trade balance

- 13.15 CAD housing starts

- 13.30 US retail sales, import/export prices

- 14.15 ECBs Panetta speaks

- 15.00 US business inventories

- 17.20 ECBs Lagarde speaks

- 19.00 FOMC rate announcement

- 19.30 FOMC press conference

- 23.45 NZ GDP

- 00.50 Jap[an trade balance

- 02.00 AUS consumer inflation expectations

- 02.30 AUD unemployment

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