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BoE send GBP lower as rates kept on hold

Good morning

For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

US clocks change this weekend, we’ll be back to normal on Monday

If there was a prize for surprising the markets, BoE would surely win the crown. They held rates at 0.1% and GBP fell sharply, GBPUSD moving around 200 pips lower from 1.3670 to 1.3470. It did try to get back above 1.3500 but this morning renewed selling has taken GBP back to those lows. Losses have been noted against EUR, with EURGBP now at 0.8575 (GBPEUR 1.1660). The question now is whether GBP can recover, I guess a lot depends on whether we see a rate rise in December, the market still seems to be pricing that in for the time being but GBP weakness could suggest conviction for a rise is waning. A rate rise is on its way, but they are not in a rush. The difference between the dovish BoE and hawkish BoC and RBA, and even the Feds start of tightening is noticeable.

However Bailey was quite clear in saying that rate rises will not necessarily help inflation. He says inflation is not caused by increased demands, but by short supply, and that a rate rise will not, for example, lead to greater gas supplies. Although inflation may not be quite as transitory as first thought, Bailey is right that some things the BoE cannot fix. Lets see what BoEs Ramsden, one who voted for a rate rise yesterday, has to say when he speaks later this morning. Meanwhile UK and France still haven’t fixed the fishing row, although there was some suggestions that yesterdays meeting went well, no agreement was reached. Talks to continue….

I mentioned Chinas Kaisa yesterday, well their shares are suspended today as debt worries continue. Worth noting as well that China’s latest Covid outbreak has spread to a 20th province, case numbers still relatively low at 800 but as we know those numbers can rise pretty quickly. Further lockdowns likely. Note China trade numbers are out in the early hours of Mondya morning.

While on the subject of Covid, the school my kids attend sent a letter home saying they are reintroducing restrictions such as mask-wearing at all times as a wave of cases sweep through. It certainly hasn’t gone away. I see global reported cases are about to hit the 250 million mark, with some 5 million deaths. That’s a fatality rate of 2% which may not sound much but if we consider 2% of the UK’s population we are looking at something around 1.5-2million people. I did see that UK have approved a tablet for vulnerable Covid sufferers to take. The tablet, molnupiravir, has been called a game changer. Fingers crossed!,

US nonfarm payrolls today, a headline reading of +400k is expected although talk of seasonal adjustments is leading some to look for a lower headline. We also have Cad employment numbers at the same time. USDCAD currently 1.2465.

The new Spurs manager, Antonio Conte, was given some idea of what to expect in yesterdays match. Spurs looked terrific for the first 30 minutes, taking a 3 goal lead, but ten minutes later the score was 3-2 and things looked as though they would get worse when Spurs had a player sent off. Not to be outdone, Vitesse then had two players sent off and Spurs managed to end the game without conceding any more, giving Conte a victory, just. After the match Conte sais a lot of improvements needed to be made. If he was in any doubt about the problems at Spurs, the Twitter announcement that Spurs put out welcoming him to the club read ‘Bienvenido a Tottenham Hotspur’. A lovely thoughtful message in Spanish. But Conte is Italian….

No such language issues for my team of course, I’d never be so daft as to attempt anything other than English for the youngsters, only because they will probably all be able to point out my errors. We are in cup action this weekend, I’ll report back on Monday.

- 10.00 EU retail sales

- 11.00 ECBs Panetta speaks

- 12.15 BoEs Ramsden speaks

- 12.30 US nonfarm payrolls

- 12.30 CAD unemployment

- 14.00 CAD Ivey PMI

- 19.30 CFTC position data

- Monday

- 02.00 China trade balance

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