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  • richard evans

Currency markets still quiet but risk sentiment waning

Good morning

Well it was another fairly quiet day yesterday in the world of currencies, GBPUSD still sits around 1.2700, EURUSD a bit lower at 1.0860 which helps GBPEUR to get back up to the 1.1700 area. We have seen some movement in USDJPY which drifted lower overnight from the mid-144s to current levels around 143.75, this means GBPJPY is back to 182.55, almost 150 points lower than this time yesterday. UBS have looked at downside USDJPY trade ideas but expect to see a push higher first. They seem to think a rally in USDJPY would encourage intervention. CITI also have an eye on downside USDJPY and AUDJPY.

Fed minutes yesterday evening offered little in the way of a surprise. Most members were happy to pause rate rises but some would happily have raised them again and see further rate rises in 2023 given core inflation had not shown sustained easing since the start of the year. US nonfarm employment numbers Friday is perhaps the highlight of this week but we do have a host of second tier employment numbers from the US today which may give us an idea of what to expect tomorrow.

Aussie trade data overnight saw an improved surplus of AUD 11.8bn, higher than expected but this had little market impact. We did see action a couple of hours after that release when GBPAUD moved up from 1.9065 to 1.9130, before starting a move lower to current levels just a few points above 1.9000. Not seen much on this move but an RBA poll has shown economists are looking for a 25bps rise in August from RBA, although beyond there the results are more equally split between no change and another 25bps rise in Sept.

US Treasury Secretary Yellen will be in China for a few days starting from today. I wonder whether this recent ban by China of rare metal exports will be on the agenda. China are doing their best to prevent CNY weakening, they fixed USDCNY higher at 7.2098 today but the reality is the pair is trading above that level, as high as 7.2500. PBoC say they have tools to stabilise FX markets. Stocks in Asia had a rough time overnight, Nikkei was down 1.7% but HangSeng came off worse at almost 3% lower.

Threads, Zukcerberg’s Twitter competitor, has launched with some 10 million users signing up. Sounds like a lot but Twitter has some 450 million although I’d expect the Threads number to increase pretty quickly. I don’t use social media enough to really know the problems facing Twitter users and whether this would push them to an alternative venue, I do use twitter to scroll through nonsense and don’t really feel the need to scroll through another platform as well. Still, get in now and you might have more chance of getting a decent username!

Finally I have read with interest about the ancient artefacts that have been found in Kent. Some 800 items, mostly stone tools have been found and date back over 250,000 years. This when Neanderthals and possibly other early human species were roaming the earth. Incredible to think. I wonder what those people would make of the worlds largest video screen in Las Vegas, a sphere made up of 1.2million LED ‘pucks’. Each puck contains 48 diodes, each of which can display 256million colours. That’s pretty amazing. Worth a look online, assuming you’re not heading to Vegas any time soon.

Tomorrow will be my last day in the office for a week as I’m heading off to sunnier parts for a few days. Looks like I may have chosen a decent week to do so, the forecast is looking a bit ropey for next week.

- 10.00 EU retail sales

- 12.30 US challenger job cuts

- 13.15 US ADP employment

- 13.30 US initial jobless claims

- 13.45 Feds Logan speaks

- 14.45 US S&P composite PMI

- 15.00 US services ISM, JOLTS job data

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