Good morning
The Bank of England did cut rates by 25bps to 4.5% yesterday, a change that was widely expected. What hadn’t been expected was the call be a couple of members for a 50bps cut, one of those being Catherine Mann who, until now, has been the most hawkish BoE official. Dhingra also voted for a 50bps cut, less of a surprise but still unexpected. Mann speaks Tuesday, hopefully we will learn more about her decision then.
BoEs Bailey did his best to persuade people that the voting pattern is not important. Bailey added that BoE are taking a careful and gradual approach to rate cuts, wary of inflation that, although underlying pressures may be easing, factors such as higher energy prices are likely to prevent inflation falling. BoE cut 2025 growth forecasts to 0.75% from 1.5% and now see inflation at 3.7%, well up from the 2% target. Doesn’t make great reading and a bitter blow for Reeves and her hopes for the economy.
GBP dropped sharply on the announcement, GBPUSD fell from 1.2430 to 1.2360 but has since made back those losses and more, now 1.2445. GBP is still lower against the Euro, GBPEUR now 1.1975 but off yesterday’s lows of 1.1935. Other GBP crosses are also lower and certainly well off the levels seen at the start of the week.
Yen is stronger again, fuelled by ongoing talk of more rate rises this year. USDJPY traded briefly below 151.00 overnight, now 151.80 but still a long way from the high 155s we saw at the start pf the week. GBPJPY traded down to 187.60 overnight, has since recovered to 189.00 but again, well off the highs seen earlier Monday and Tuesday.
Elsewhere, RBI did cut rates 25bps to 6.205%, the first cut for nearly five years. The cut comes amid uncertainty of the global economic outlook, but RBI remain fairly neutral on rates, so perhaps we shouldn’t expect further cuts any time soon.
In sport, Spurs were dumped out of the League Cup by Liverpool who hardly broke a sweat as they overcame their one goal deficit to stroll out 4-0 winners last night. Disappointing, but unfortunately not surprising. Next up for Spurs is FA cup action on Sunday where they face Aston Villa. Another cup exit looks possible, so we’ll have to settle with just the Europa League and of course ensure we stay out of a relegation battle.
The Six Nations continues this weekend, England facing another tough test, this time against France. I’d hoped we were going to see a better England performance in this tournament, but I’ve lost a bit of confidence in that.
The latest US nonfarm payrolls data will be released this afternoon, a headline around +170k is expected while the unemployment rate is expected to stay at 4.1%. Markets could well be quiet heading into the release, from then it is really down to the data, a better headline should give USD support, a weaker than expected reading could see the USD ending the week on a low.
Next week we’ll have the latest CPI inflation numbers from the US. We will also see UK and EU GDP, plus US retail sales, certainly enough to keep us on our toes. Until then, have a great weekend as and when it comes, next couple of days could be a bit drizzly but Sunday should be dry with a bit of sunshine, might have to get out in the garden for a spot of tidying up.
Have a great day…
- 12.15 BoEs Pill speaks
- 13.30 US nonfarm payrolls
- 13.30 CAD unemployment
- 14.25 Feds Bowman speaks
- 17.00 Feds Kugler speaks
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