Good morning
Lets start with the overnight news, BoJ did indeed raise rates 15bps to 0.25%. USDJPY, which had been up at 155.00 yesterday morning had started to move lower through the day on talk we could see a rise of up to 25bps, reaching around 153.30 by the London close. The announcement brought a wave of volatility that saw USDJPY swing from 151.60 to 153.80, as I type it is 152.10. GBPJPY is 195.20. Although volatility over such an announcement is not unusual, I’m wondering whether it was the result of some mixed reporting. I have seen some reports suggesting BoJ raised rates 25bps which perhaps added to confusion.
A small uptick in EU GDP yesterday didn’t really cause much of a stir, EURUSD not moving far from level seen this time yesterday, although did sneak below 1.0800 for a short time later in the afternoon. Now 1.0815, todays EU inflation report could bring a little more volatility.
GBPUSD hit a low of 1.2820 yesterday, it did manage to regain 1.2850 overnight but this morning is showing signs of weakness again, slipping back to 1.2830, with GBPEUR 1.1865. Not huge moves, it feels like we are treading water ahead of the BoE rate announcement tomorrow.
AUD weakened overnight on the release of their latest inflation numbers. GBPAUD traded up to 1.9800, the highest we’ve been since August last year, although it has since backed off to 1.9725. To me the numbers look in line with expectations although the trimmed mean CPI which tries to lessen the impact of the more volatile components, did come in 0.1% lower at 3.9%. AUDNZD, which had reached 1.1150 yesterday, is now back just below 1.1000 AUD weaker on the reduced chance of any rate rises.
US JOLTS job opening data yesterday had minimal market impact although therer was an initial bout of USD buying. We have the ADP employment index today but of course the main event will be the FOMC rate announcement this evening. There had been some talk of a possible cut at this meeting but September is by far the more likely. There is some suggestion this morning that while Powell may well keep the September door open, he could warn of various risks that could delay rate cuts. So, we think a rate cut in September but Powell will fall short of setting that in stone. A failure to signal any cut in September is likely to lead to a higher USD.
Having traded as low as $2,370 this week, gold has pushed up to $2,420 on renewed geopolitical concerns after Israel hit targets in Tehran which killed the Hamas leader, Haniyeh. Risks of escalation are increasing. Meanwhile Venezuela’s government is cracking down on opposition members and protestors after Maduro claimed victory in the election. With the ongoing Russian invasion of Ukraine, China threats over Taiwan and the entire South China Sea region and North Korea lurking in the background, there is plenty of scope for things around the world to get worse. Mind you, all is not well at home, as you have no doubt seen in the headlines.
In sport, congratulations to the GB mens swimming relay team who took gold in the 4x200m freestyle after Hales also took gold for GB in shooting. The triathlon events have started today, Beth Potter took bronze this morning in the women’s event, quite a story for Potter who competed in the Olympics 10,000 metres eight years ago in Rio. The mens is due to begin around 9.45am having been postponed from yesterday due to the water quality. Quite how a river can get ‘clean’ in one day is something of a mystery although organisers say the hotter weather has had an impact.
It was a scorching day here yesterday, 30°c plus with little in the way of breeze. Today looks like being another hot one, as does tomorrow although the forecasters are warning of thunderstorms Thursday afternoon.
Have a great day
- 10.00 EU HICP
- 13015 US ADP employment
- 14.45 US Chicago PMI
- 15.00 US pending home sales
- 19.00 FOMC rate announcement
- 19.30 FOMC press conference
- 02.30 AUS trade balance
- 02.45 China caixin manufacturing PMI
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