Good morning
Last thing I wrote Friday was that we could be in for a quiet trading day. I was right, for most of the time. Until BoEs Ramsden spoke. Ramsden could be regarded as one of the more hawkish BoE officials although has opted for ‘no change’ at the last three meetings. On Friday afternoon he said he was more confident inflation that inflation pressure were easing, not exactly ground breaking stuff but enough for the market to sense rate cuts may be close and certainly enough to send GBP lower.
GBPUSD dropped 100 pips from the 1.2465 area to 1.2365, while GBPEUR moved from 1.1685 to 1.1605. GBP also fell in the crosses with the likes of GBPJPY and GBPAUD falling from 192.65 and 1.9405 to 191.00 and 1.9200 respectively. We are mostly off those lows as I type, GBPUSD, GBPJPY and GBPAUD at 1.2380, 191.50 and 1.9245, although GBP does remain under pressure against EUR with GBPEUR at a lowly 1.1610.
The GBP weakness came as something of a surprise, and it is perhaps more surprising it has not regained some lost ground against EUR, given the recent comments from ECB officials have all been pointing towards a June cut and then more to follow through 2024. EURUSD is holding up well, currently 1.0665. Lagarde speaks later today, I presume she’ll offer more of the same June rate cut idea.
USDJPY is up at 154.70, yen remaining weak despite Ueda’s ongoing suggestions that Japan rates could rise if the weak yen is seen to be affecting inflation. We have a BoJ rate meeting later this week and surely they will try to sound hawkish in an attempt to prevent further yen weakness. Whether they go so far as to raise rates again remains to be seen, I’ve not seen anyone really looking for that yet but wonder if we’ll see that change as we get closer to the meeting.
With no major escalation in the Middle East after the Iranian and Israeli strikes, risk sentiment has improved with oil prices lower and the safe havens such as Yen and CHF also weaker. Gold prices are off the recent highs as well, now $2,358, but there is some thinking that losses could be limited due to the ongoing central bank demand I mentioned recently.
A new US/China trade war could be hotting up as China slaps a 43% tariff on a widely-used US chemical, claiming it is damaging China’s own domestic industry. We wait for a US response. US have asked China to stop providing weapons-related material and technology to Russia, meanwhile US has at last approved a US$95bn aid package, much of which is earmarked for Ukraine who have been struggling against the Russian invasion without much needed arms and ammunition.
It is a light calendar today but will liven up as the week goes on with EU, UK and US PMIs tomorrow, Aussie inflation wednesday, US GDP Thursday, that BoJ rate announcement Friday and then the closely watched US PCE deflator on Friday afternoon. Attention will also be on equity markets, with some players concerned we could see something of a collapse. Let’s hope not.
We had a decent weekend of sport, Man City overcame a determined Chelsea side to progress to the FA cup final, Chelsea ruing several missed goal opportunities. But they main event was Coventry v Man Utd yesterday. With Man Uts 3-0 up they seemed to be cruising to victory, before Coventry scored three goals to take the tie to extra time, and them even thought they had scored a late winner, before being disallowed by VAR for the tightest of offside decisions. They lost on penalties, very disappointing for them but the thousands of fans they had at Wembley had plenty to cheer about. An all-Manchester final it is then.
Meanwhile, Aston Villa helped their chances of a top four finish with a win at Bournemouth, and Liverpool drew level on points with Arsenal at the top of the table after a win at Fulham, but remain second on goal difference. Spurs didn’t play, in fact they aren’t playing until Sunday when they will be facing Arsenal. They’re going to struggle to get top four and I’m even fearful of the potential for them to drop down the table despite the ten point gap they currently enjoy. Its going to be a terrific end to the season, that’s for sure.
Have a great day
- 11.00 Germany Buba monthly report
- 15.00 US consumer confidence
- 16.30 ECBs Lagarde, ,Villeroy speak
- 00.00 AUS Judo Bank services, manufacturing PMI