Good morning
USD off its recent lows, with EURUSD reaching as low as 1.1120 after the London close, GBPUSD was down at 1.3315 overnight. Both pairs a touch higher now at 1.1155 and 1.3350 respectively. GBPEUR stays below 1.2000, now 1.1970. Still questions over the size of the Feds next rate cut seem to dominate current market movements.
It wasn’t a busy calendar yesterday, Swedens Riksbank lowered rates by 25bps to 3.25% but otherwise there isn’t much to report. A different story overnight as China announce further measures to offers support to the economy following the rate announcements Tuesday. The needy in China will receive a cash handout by the end of the month, while bank capital could be boosted by up to US$142bn. The coordinated measures across various Chinese government agencies suggests they are serious and further measures could well be announced.
CNY/CNH moved lower with USDCNY now 7.0180 having been up at 7.0625 earlier in the week. AUD, susceptible as it is to Chinese market weakness, has seen a bit of a rally with AUDNZD trading up from 1.0850 to 1.0930 and GBPAUD down from 1.9530 to 1.9440.
SNB cut rates 25bps this morning to take rates to 1%. There had been quite a difference of opinion between some of the bigger banks, with CITI looking for no change and UBS talking of potential for a 50bps cut. However 25bps it was. EURCHF has been capped around 0.9500 for a month or so now, we are just a few pips away from that level now, GBPCHF is near 1.1370, the highest levels seen for almost two months. We could well see further CHF weakness although bear in mind the potential for safe-haven buying should tensions rise in both Ukraine and the Middle East.
It’s a much busier calendar today, US GDP the highlight, looking for a number at or close to 3%. We will also hear from several central bank officials including Powell and Lagarde. The general theme from Fed officials recently has been the agreement with the 50bps cut and the need for Fed to balance inflation and employment, support seems to be erring on the side of employment at the moment. Whether we’ll get any clues as to Fed thinking on rates path from Powell or his colleagues remains to be seen but don’t hold your breath.
Bowman, the sole dissenter at the last Fed meeting who called for a 25bps cut does speak today, she has previously voiced concern that a 50bps would signal too much economic weakness and worries that it sends a premature ‘we’ve beaten inflation’ message.
I’ve mentioned above Ukraine and the Middle East. We’ve seen US calling for a ceasefire in Lebanon but as yet that has fallen on deaf ears, with Israel continuing its attacks against Hezbollah targets. Israel seem as intent on destroying Hezbollah as they do with Hamas, although as we know even if those groups were to be defeated, the underlying feelings of hatred between the two sides will not go just away.
In terms of Ukraine, Putin has been throwing the ‘nuclear’ word around, suggesting that should Russia be attacked by Ukraine with weapons supplied by a nuclear force, it would be reasonable to retaliate with their nuclear capability. This perhaps shows how Russia fear the tide in Ukraine could be turned by the use of such weapons but we do know that Putin’s threats shouldn’t always be ignored.
It looks like being another unsettled day in terms of weather but I’m hoping the heavy rain we had overnight has eased off for good. Warnings of thunderstorms remain in place. Wonderful.
Plenty of domestic and European football at the moment, Spurs will face Man City in the next round of the League Cup, lets hope Guardiola stands by his recent comments that they won’t waste energy on the competition. Spurs in action this evening against the mighty Qarabag in the Europa League, I have to be quite confident but I wouldn’t be at all surprised to see a weakened team being fielded.
That’s about all for now, have a great day…
- 09.00 SNB rate announcement
- 09.00 ECB economic bulletin
- 10.00 ECBs Elderson speaks
- 13.30 US GDP, durable goods, initial jobless claims
- 14.10 Feds Collins, Kugler speak
- 14.15 Feds Bowman speaks
- 14.20 Feds Powell speaks
- 14.25 Feds Williams speaks
- 14.30 ECBs Lagarde speaks
- 15.00 US pending home sales
- 15.15 ECBs de Guindos speaks
- 15.30 Feds Barr, Cook speak
- 17.00 ECBs Schnabel speak
- 18.00 Feds Barr, Kashkari speak
- 23.00 Feds Cook speaks
- 00.30 Japan Tokyo CPI
- 02.30 AUS RBA financial stability review
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