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  • richard evans

Door open for possible lower US rates after softer US CPI inflation

Good morning

 

The prospect of lower US rates came a step closer after US CPI inflation came out pretty much in line with expectations, therefore importantly lower than last month, while the m/m headline was 0.3% vs 0.4% expected.  At the same time, a lower than expected retail sales number was released, the latest economic statistic that points to a potentially weakening economy.   USD weakened and US stocks surged higher, many making all-time highs, on hopes that perhaps a rate cut may come at some point in 2024. 

 

GBPUSD traded up from 1.2620 to a high overnight of 1.2700, EURUSD moved from 1.0825 to almost 1.0900, while USDJPY fell from 156.00 to hit a low overnight of 153.60.  USD is a little off those lows now, at 1.2675, 1.0875 and 154.30, but with possible rates rises off the table and rate cuts back in favour, the potential for further USD weakness is clear.  The move in USDJPY has dragged GBPJPY lower to 195.50, while GBP has made a little ground against EUR, now at 1.1655.

 

AUD weakened a touch after disappointing Aussie employment numbers overnight. The headline figure of +38.5k looked decent but the drop in full time employment this month, and a downward revision to the previous month, plus as increase in the overall unemployment rate, was enough to see AUD lower.  GBPAUD pushed up from a low of 1.8910 to 1.8995, now 1.8980, while AUDNZD slipped from 1.0940 to 1.0915.  Not a massive move, I have no doubt RBA will be looking at these numbers closely, but it probably won’t be enough to turn them overly dovish..

 

The headlines are dominated by the news of the attempted assassination of the Slovak PM Robert Fico, who was shot several times.  I must confess my immediate thoughts were ‘it must be the Russians’ but Fico is something of an ally to Putin and rather anti-EU.  He has also been linked to the Italian mafia, according to news reports.  The shooting does seem politically motivated, political opinions in Slovakia are hugely divided between those in favour of the West and the EU, and those seeking closer relations with Russia.   The shooter was detained at the scene so I’m hopeful we will learn more about the motives behind the attack.

 

A win for Chelsea last night has put them in touching distance of the fifth place, should they win and Spurs lose at the weekend.  Newcastle would have been in the same position had they beaten Man Utd, but in the end it was Man Utd who came away the winners.  It is now all down to the last matches of the season on Sunday.  Elsewhere in the football world, Mark’s Leeds take on Norwich tonight in the second leg of the Championship play-off semi-final.  The winner will face either Southampton or West Bromwich Albion in the final, that tie will be played tomorrow.  Mark could be in a great mood or a terrible mood this time tomorrow.

 

Following that US inflation number, Fed officials have been quick to rule out early rate cuts, Kashkari has said the economy is still more resilient than had been expected.  We have several Fed officials speaking today, we will be looking for any clues as to their thinking after the latest inflation data.  We do have some US data on the calendar today, not the most important perhaps but any weaker than expected numbers may well add to the notion that those rate cuts could still come in 2024.

 

Have a great day, it looks like we could get a bit of rain which would be disappointing but we’re well and truly used to it by now. 

 

 

-  12.00 BoEs Greene speaks

-  13.30 US philly fed survey, housing starts, initial jobless claims

-  14.15 US industrial production

-  15.00 Feds Barr speaks

-  15.30 Feds Harker speaks

-  17.00 Feds Mester speaks

-  20.50 Feds Bostic speaks

-  23.45 NZ PPI

-  03.00 China retail sales, industrial production

 

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