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  • richard evans

China upsets the apple cart

Good morning


Currency markets have been generally quiet since I wrote yesterdays report, a brief rally in GBPUSD above 1.2500 this morning couldn’t be sustained and it now sits 1.2480 while EURUSD is 1.0715, leaving GBPEUR 1.1650. USDJPY had a sharp move lower overnight from 147.30 to 146.60 but it didn’t take long to regain losses and as I type it is back up at that 147.30 area.


We heard from a few Fed officials yesterday, all sounded pretty much the same, Feds Williams said policy was in a decent place right now and must remain data dependent, Goolsbee said the Fed are almost done with rate rises and the question will soon become how long rates need to stay at these levels before they can be confident inflation will work its way back to 2%. Logan said a skip in September may be appropriate but did leave the door open for another rate rise after that and Feds Bostic said he feels rates are restrictive and they should let that play out. Sounds like a ‘no change’ is a distinct possibility when they meet in a couple of weeks.


USDCAD did trade higher into London close, reaching 1.3690 and making new highs since March 2023 in the process, but is now back to the 1.3665 area. BoCs Macklem spoke yesterday but offered little other than to confirm BoC may or may not raise rates again, depending on data. He did express some concern that progress in bringing inflation down has slowed and added I would be wrong to expect rates to return to pre-Covid levels. CAD unemployment numbers are the only item on the calendar today, they are expected to show a positive change in employment but somewhat strangely a slight increase in the unemployment rate.


Next week we will get the ECB rate announcement, markets remain mixed here with a small majority seeing ECB leaving rates unchanged while the remainder are looking for a 25bps rise. No Surprise that forecasts are equally mixed as to where rates will be by year end, some see it at its current level of 3.75%, some see 4%. With rates at or near what looks like a peak I’m not sure EUR can gain much ground, even if we do see a rate rise next week.


Apple shares have traded lower over the past couple of days after China banned the use of Apple phones by government officials. This comes as Huawei unveiled its own high-speed capable smart phone. It is said to use Chinese made chips after the US restricted sales of chips and other tech to China. However some investigations reveal some parts are made by South Korean firm SK Hynix. Hynix say they no longer work with Huawei and will conduct investigations as to how their products ended up in the phone but the bigger surprise perhaps is the speed with which China developed their own chip technology. The ban on the use of Apple phones in China could well be expanded and with a new Huawei phone available it would seem that Apple’s are going to struggle in China, which is a bit harsh given that is where a lot of Apple products are manufactured.


To the weekend, there is a load of sport to enjoy. The rugby world cup starts today with a a match between two of the tournament favourites France and New Zealand. I think the all blanks have been under par recently and with France at home I wouldn’t be surprised to see them take the win. Always hard to bet against the all blacks mind you. England take on Argentina tomorrow.


Meanwhile England take on New Zealand in crickets one day international today. England are favourites although NZ will be on a high after winning the last two T20 matches to draw level in that particular series.


And finally Englands football team take on Ukraine tomorrow in a world cup qualifier, England firm favourites and there is some excitement about the potential for this team with a host of decent players available for selection.


So, sunshine, rugby, cricket and football. What a terrific weekend ahead…


- 13.30 CAD unemployment


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