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BoEs Pill gives GBP a boost, markets await US CPI

Good morning

 

GBP got a boost yesterday as BoEs Pill came across far more balanced than had been expected from someone who has been historically on the dovish side.  I think there had been some hope he’d be talking of success in the fight against inflation and imminent rate cuts, instead warning that although rate cuts are a matter of ‘when’ rather than ‘if’, BoE are still fearful of upside risks to inflation, particularly the persistence of some areas of inflation.  BoEs Mann followed this up later in the afternoon with some typically hawkish comments, saying services inflation was rising quickly and the UK employment market remains tight.  An August rate cut might be wishful thinking.

 

GBP pushed higher on Pill’s comments, GBPUSD rising from 1.2800 to 1.2860, and has found support from this mornings GDP number which came in at 0.4% against an expected 0.2%.  Not exactly steaming ahead but an improvement on the zero last time round and making a positive Q2 GDP number almost a certainty.  GBP also made and held gains against the single currency, GBPEUR up at 1.1870 as I type.  GBP has also pushed higher against other majors, GBPNZD is 2.11, GBPJPY up at almost 2.08, GBPAUD back above 1.90 and GBPCAD above 1.75.

 

EURUSD is 1.0835, very slightly up on this time yesterday, another reasonably dovish appearance from Powell who reminded us that inflation does not have to be at 2% in order to see a rate cut gave the USD no reason to push higher.

 

Key today will be the US inflation release. Anything softer than the 3.1% headline, or core 3.4%, is likely to encourage markets that Powell is on the right track with his dovish stance and send USD lower still on rate cut expectations.  Knowing these markets though, I would not be at all surprised if Powell had done his best to talk the USD lower ahead of an inflation report that surprises to the upside.  I’m sounding a bit like a conspiracy theorist.  We’ll find out at 1.30pm.

 

I can’t leave without mentioning the England win over Netherlands yesterday evening.  A more spirited performance for much of the game by the men in white, although we did slip back into the sideways/backwards passing routine a little too easily in the second half.  Whether it was a penalty or not isn’t really important now.  I think it was, harsh maybe but with studs up going into a challenge, no defender can complain too much.  Well, the Dutch can, but perhaps, for those of us old enough to remember, it is poetic justice for Loeman who should have been sent off back in 1993.   

 

So England reach their second consecutive Euro final.  Spain are going to be a tougher proposition than Italy were back in 2021 and England will have to be sharper than ever.  I’ll go into it with hope and some optimism, but we’ve all followed England enough to know we should be prepared for the worst. 

 

I know football fans have a terrible reputation, but sometimes they can be truly harmless, funny and entertaining.  There is a video doing the rounds of some England fans who are serenading a German riot police officer who bears an uncanny resemblance to Gareth Southgate.  You’ve probably all seen it by now, such is the speed of social media, if not I’m sure you’ll see it sometime today.  Made me smile anyway. 

 

Have a great day…

 

-  13.30 US CPI

-  23.30 NZ business PMI

-  04.00 China trade balance

 

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