Good morning
GBP had a decent day yesterday, trading up against both USD and EUR, reaching 1.3215 and 1.1875 through the afternoon although did finish a few points below those levels. The idea of Fed and ECB cutting rates while BoE look set to remain on hold is propping up GBP for the time being. Of course the key remains whether Fed cut 25 or 50bps tomorrow, and regardless of the size of the cut, how dovish the overall message is. If anything, pricing suggests the larger rate cut looks more likely at the moment, and I see some US senators have been pushing for a 75bps cut.
Otherwise it was a pretty quiet day, no great surprise given the limited calendar and the importance of the data coming later this week. For today, US retail sales will be seen, they’d have to be pretty exceptional one way or another to really impact the Feds decision. Canadian inflation numbers are out, a softer reading is likely to get the market looking for a 50bps cut at their next meeting in late October.
Having traded below 140.00 for the first time in over a year, USDJPY had an odd spike back up to 141.20 overnight before trading back to 140.30. Now 140.55, I’ve not seen a decent explanation as to what led to the move, a lack of liquidity has been suggested but it is perhaps more likely to be a simple bout of squaring up of short USDJPY positions ahead of the FOMC.
We’ll have the latest UK inflation readings early tomorrow morning. Headline CPI is expected to stay at 2.2%, although core CPI could well tick higher to 3.5%. If so, it will be difficult for BoE to justify a rate cut on Thursday. Perhaps if Fed were to cut by 50bps, BoE could consider a 25bps cut. I’m not suggesting BoE policy has to follow the Fed, but their rate moves will have some bearing whether or not they care to admit it.
In other news I see a new Covid variant has emerged which looks set to become the dominant strain this autumn and winter. Named XEC, it is reported to have better transmission potential than other recent variants. All the usual symptoms, mind you I’m not sure we have any test kits any more so a common sense approach will have to apply should we be unlucky to catch it. Still, rather that than M-Pox, which although is pretty unlikely, I see the government has ordered additional supplies of vaccines amid growing concern of the outbreak in DRC and other parts of Africa.
I see universities are calling for the need to increase fees. I know several young people at university and they all seem to say the same thing. They have fund, yes, and it can be some of the greatest years of a young life. But for the £9,000/year fee, face to face learning is down to a few hours each week, much of it is on line and in some cases it is older students are teaching younger students. I do wonder how quickly one could pass a degree if the fun, partying and long holidays were stripped out of it.
I see some Uni’s are already offering two year accelerated courses, they are charging over £12k per year for the privilege but with less spent on accommodation and living, for some it may work. I know it may not be the idea but if a lot of learning is going to be online, let’s go one step further and just offer remote online learning and make it completely affordable. Is Open University still a thing?
Champions League begins this evening, I’m interested but for some reason feel less into football than I have in previous seasons. No, its nothing to do with Spurs not being involved, perhaps when the cold, dark winter nights really arrive I’ll be more inclined to curl up for the evening on the sofa but for now I seem to have other things to do. Still, Milan vs Liverpool does sound like an interesting tie. Kick off at 8pm, hhmmm it’ll be cold and dark by then I’m sure……
Have a great day
- 10.00 German ZEW
- 13.30 US retail sales
- 13.30 CAD CPI
- 14.15 US industrial production
- 00.50 Japan trade
- 07.00 UK CPI, PPI, RPI
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