Good morning
It wasn’t exactly the busiest day in the currency markets yesterday, a bit of GBP upside was the main theme of the day which saw GBPUSD reach almost 1.2700 and GBPEUR move up off the morning lows towards the high 1.20’s. A slightly better UK services PMI number seems to be responsible, the improvement in GBP starting just around the time of its release, while the lower than expected manufacturing PMI was pretty well shrugged off.
GBP had moved off those highs overnight but UK unemployment this morning offered further support for GBP with lower claimants, higher average earnings and a decent positive net change in employment numbers. GBP up around 1.2700 and 1.2100 vs USD and EUR, while other crosses are also performing well, with GBP at 2.00, 2.20 and 1.8125 vs AUD, NZD and CAD. The latter has been weakened by a surprise resignation by Canadian FinMIn Freeland, which is placing greater pressure on Trudeau’s own positon.
In the EU, German Chancellor Scholz has lost the confidence vote by 394 to 207 which leads to an election in Feb 2025. EURUSD is currently 1.0490 from a 1.0530 overnight high and as mentioned above has lost ground again against GBP. Even mildly hawkish comments from ECBs Schnabel, saying they must be careful not to overreact, and warns of upside inflation risks such as higher energy prices and possible US tariffs, have been unable to help EUR.
Social media has, for a few days, been full of reports of drones operating over cities, airports and military bases, mostly in the US but we are not without our own sightings. While some reports may be false, perhaps manned aircraft mistakenly identified, others seem to have more credibility and yet no one has so far been able, or willing, to explain them. Obviously there is a host of conspiracy theories going around but it will be interesting to see whether or not we ever get a decent explanation.
US retail sales data this afternoon is today’s main event although Canadian inflation figures released at the same time will also be closely watched given the BoC rate cuts this year which have taken rates from a peak of 5% to 3.25% currently. UK inflation numbers are out early tomorrow morning, coming one day ahead of the BoE rate meeting. The stronger UK employment numbers means BoE are unlikely to make any surprise Dec rate cuts, we’d need to see considerably lower UK inflation readings for cuts to be back on the table.
England have been heavily defeated in the third test and final test of the series against New Zealand, quite a turnaround from the emphatic England win in the second test. NZ won by 423 runs after England scored just 234 in their second innings. England do win the series 2-1 but the manner of this defeat is surprising and more than a tad disappointing.
That’s about all. I am starting to get a number of out of office email bouncebacks when I send this each morning, some lucky folk already starting to see the holiday season as starting. For the rest of us, it isn’t quite time to relax, give it a few more days.
Have a great day
- 09.00 German IFO
- 10.00 German ZEW
- 10.00 ECBs Elderson speaks
- 13.30 US retail sales
- 13.30 BoC CPI
- 14.15 US industrial production
- 23.50 Japan trade balance
- 07.00 UK CPI, RPI, PPI
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