Good morning
BoC did indeed cut rates 50bps to 3.75% yesterday but CAD moves were somewhat muted. USDCAD ticked up to 1.3860 but failed to follow through and BoC Gov added little during the press conference. Inflation risks are pretty balanced, 2024 and 2025 growth forecasts were unchanged at 1.2% and 2.1% respectively, while 2026 was lowered a touch from 2.4% to 2.3%. Also in Canada, PM Trudeau is under pressure from members from his own party to stand down, despite overcoming two confidence votes. They have set a deadline of 28th October.
USD held onto gains through the day, GBPUSD slipped to 1.2925 just after the London close, EURUSD was 1.0775 which was just 10 pips or so off the days lows, which in turn were below the August lows and the lowest levels since early July. For those who like technical analysis, I see something of a rising trend line from the late Nov 2022 low which has been tested and has held several times since, including Oct 2023, and Apr and June 2024. It currently comes in around 1.0740.
GBPEUR traded up to 1.2040 but dropped off through the day back towards the 1.2000 level. As I type, GBPUSD has pushed up off the lows, now 1.2955, while EURUSD has held the 1.0775 level, which means GBPEUR has pushed on to 1.2025. USDJPY is currently 152.05, GBPJPY 197.00, both off recent highs. We’ve seen a little of the usual verbal intervention, while BoJs Ueda has said he is kept awake thinking about the timing and size of the next rate cut.
We know other central bankers were speaking yesterday but as I’d expected none really offered anything we’d not heard before. ECBs Holzmann said another 50bps cut is unlikely but not impossible, RBNZ Gov Orr said rates remain restrictive but he prefers to lower rates gradually, still looking at ongoing inflation pressures. Orr also mentioned that he’d wish participants would actually take the time to read RBNZ minutes rather than rely on just picking up the odd point from journalists or analysts, who he thinks focus on just specific areas. He was quite honest about how difficult a central banks job is.
In sport, Man City and Liverpool won their Champions league matches, City with a convincing 5-0 win. In the big match, Barcelona beat Bayern Munich 4-1. The serious stuff starts this evening, with Spurs taking on AZ Alkmaar in the Europa League. Man Utd and Chelsea are also in European action tonight. In cricket, England have slipped to 112-5 in the deciding test match against Pakistan. That doesn’t bode well.
In other news, I see that disposable vapes will be banned from next June. I have found it amazing that we have to drink out of paper straws while vapes, full of lithium batteries and goodness knows what chemicals are thrown into landfill at an alarming rate. I’m not sure what will happen to people who use vapes, I presume there are non-disposable versions but I’d imagine they are larger, less convenient and certainly less attractive than the current crop of disposable vapes.
Today is very much a day of PMI’s, with numbers out from EU, UK and US. We have seen some very better than expected PMI numbers out of Germany so far this morning, but we’re watching the numbers for any signs of weakness, particularly for the US data. Weak numbers could see the USD reverse some of the recent gains.
Have a great day
- 09.00 EU services, manufacturing PMI
- 09.30 UK S&P services, manufacturing PMI
- 11.00 Buba monthly report
- 13.30 US initial jobless claims
- 13.45 Feds Hammack speaks
- 14.00 BoEs Mann speaks
- 14.45 US S&P services, manufacturing PMI
- 15.00 US new home sales
- 20.45 BoEs Bailey speaks
- 00.01 UK GfK consumer confidence
- 00.30 Japan Tokyo CPI
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