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  • richard evans

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

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