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ECB achieve dovish rate rise

Good morning

ECB did raise rates 75bps yesterday to lift rates to 1.5% but the general feeling is there was a slightly dovish tilt, leading to expectations for a Dec rate rise of 50bps rather than another 75bps. The vote wasn’t unanimous, three members wanted only a 50bps rise this time. This would be in line with many other central banks who seem to be slowing the pace of rate increases as they balance their battle against inflation with not letting economy deteriorate too much, Lagarde agreeing that the risk of recession had increased. EURUSD fell from 1.0050 to below parity and despite another retest of the mid-1.00’s in the afternoon, the pair quickly fell back to the 0.9985 area. GBPEUR ticked higher after the ECB announcement, moving from around 1.1515 to trade just above 1.1600, now 1.1585.

The afternoon moves were more in line with general USD than anything specific in EUR. GBPUSD moved up to 1.1635 in the afternoon, before slipping back to 1.1560-70, settling around 1.1600 by the end of the London day but has moved lower this morning to test the low 1.15’s. Gold saw similar fortunes, testing the $1665 area a few times through the afternoon, before testing the lower end of the range around $1657, a remarkably narrow range after the volatility we saw late last week. There is something of a short term declining channel which comes from the series of highs and lows since Wednesday morning, the lower and upper ends of which are currently $1650 and $1663. We did breach the upper end of this channel briefly overnight, trading up to $1667, but is heading towards the lower end of the channel as I type, currently $1652.

USDJPY is a little higher after BoJ kept policy unchanged and after PM Kishida announced a new stimulus plan totalling almost $500bn, which will include some government spending and subsidies to reduce household energy bills, which should in turn lead to lower inflation numbers, even though the stimulus itself should eventually prove to be inflationary.

China sees Covid cases rise amid talk of new lockdowns and closures of public spaces in Beijing, Wuhan and Guangzhou. These are so numerous now it hardly seems worth mentioning them, particularly as I’m sure there are plenty more local lockdowns that we do not hear about. Until there is a change in China’s zero-Covid policy we will continue to hear news of such lockdowns that come and go and possibly form part of daily life in China these days.

Into the weekend, the forecast suggests it should remain dry which means I’ll be out on the garden gathering up the carpet of leaves that suddenly seems to have appeared despite the fact the trees still look full of leaves. It’s going to be a long autumn. Mind you if I get bored I could head into the town centre where there is something rather interesting, if a bit childish, going on. A guy in a flat has set a webcam up that looks down on part of the high street. It streams live, I have no idea how long it has been going on but it has something of a large following now. People who know it is there turn up and perform daft things to entertain the watchers. Given the town has a population of just 25,000 or so, it is incredible that the site already has some 500,000 ‘likes’. The power of social media! I’m sure there will be some privacy law that will bring an end to the site at some point but for now it does seem pretty harmless fun.

- 09.00 German GDP

- 10.00 EU consumer confidence

- 13.00 German HICP, CPI

- 13.30 US personal income, spending, core PCE

- 13.30 CAD GDP

- 15.00 US pending home sales, Michigan sentiment survey

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