Good morning
A fairly quiet day in the FX markets yesterday, for the most part GBPUSD traded a 50 pip range and EURUSD an even tighter 30 pips range. ECBs Lagarde said the ECBs tools to deal with fragmentation will be effective, she also said July would see a 25bps rise to combat inflation which she says is largely down to high energy prices. Villeroy also talked of the new ECB tool to protect the Euro and smooth bond market moves, while ECBs Lane said if ECB raise rates 50bps in Sept it is not a sign of panic, just that negative rates may no longer be appropriate.
As I type EURUSD trades up to the range highs around 1.0540. Macron set to meet both far left and far right parties today following the loss of his majority in the weekend elections. Neither party will be too eager to work with Macron.
UK sees a train strike today which will likely cause a bit of chaos for many. As you know I am no fan of strikes and don’t think they should be allowed. I do wonder however whether this is the start of more widespread action, I’m sure I read somewhere that teachers and nurses could follow with strikes of their own. If I were a nurse looking at train drivers pay demands, I’d be thinking I’m more deserving. Personally I’d be annoyed to see train drivers pay increase over nurses.
BoEs Mann spoke yesterday, she had voted for a 50bps rate rise at the last meeting and seems eager to continue to push rates higher. She also mentioned the pressure likely to face GBP if ECB and Fed raise rates, and therefore the potential for higher inflation. She isn’t overly worried about protecting GBP, just wants to ensure inflation is dealt with as best as it can be. BoEs Pill speaks today, I don’t believe he voted for 50bps last time but has since said he might look at such a move next time.
GBPUSD up to 1.2300 and GBP makes small gains against EUR, now at 0.8575 (GBPEUR 1.1660). UK inflation numbers will be out early tomorrow morning, expected to remain around 9% on higher fuel and food prices, but perhaps a slight reduction in the core reading which excludes food and energy.
RBA minutes showed that further rate rises would be needed, 50bps rises were necessary given the low starting point but that 25bps increments would still give rapid tightening. RBAs Lowe also spoke, he ruled out a 75bps move in July but seemed uncertain of whether 25 or 50bps would be seen. Overall then, perhaps 50bps in July followed by 25bps rises seems most likely. AUD a touch lower than this time yesterday, AUDUSD 0.6975, AUDNZD 1.0975 and GBPAUD up to 1.7640.
USDJPY has had a fairly quiet session, mostly trading a range between 135.00 and 135.20 overnight. Not a particularly exciting economic calendar on offer today so maybe with people stuck at home with the sun shining, perhaps another quiet day is ahead.
- 08.15 BoEs Pill speaks
- 09.00 EU current account
- 13.15 BoEs Tenreyro speaks
- 13.30 US Chicago fed nation activity index
- 13.30 CAD retail sales
- 15.00 US existing home sales
- 23.45 NZ trade balance
- 00.50 BoJ minutes
- 07.00 UK CPI, RPI, PPI