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ECB on track to cut rates in June, while Fed may not cut at all

Good morning


US PPI came in very slightly softer than expected yesterday but this has done little to slow the rise of the US dollar, which continues to make higher levels against most majors as the markets continue to question the notion of rate cuts in 2024. 


GBPUSD is now down to 1.2505, EURUSD 1.0675, putting GBPEUR at 1.1715, with EUR a little more on the defensive after the ECB rate meeting.  They did keep rates unchanged yesterday but said nothing to suggest a June rate cut is off the table, Lagarde making it clear ECB would not wait for Fed to cut rates before they take  action.  Indeed it is reported that some members were ready to cut rates yesterday.  Meanwhile USDJPY sits at 153.35, oblivious to the ongoing verbal intervention from Japanese officials. 


UK GDP this morning came in at +0.1% as expected, hardly ground breaking stuff but at least it is still in positive territory.  Industrial production data was stronger than expected but this wasn’t enough to stop the GBPUSD sell-off.  I am wondering whether we are seeing USD buying ahead of the weekend as we did last week as a flight to safety amid renewed concerns Iran will attack Israel in retaliation for the recent Israeli attack on the Iranian embassy in Syria. 


US have apparently asked China to ask Iran to not attack Israel, in something that sounds very much like playground type tactics.  Iran has reportedly said it will respond the Israeli attack but in a way that will not escalate the middle east situation.

At midday we will see the Bernanke review of BoE procedures which is likely to lead to reforms at the central bank in terms of forecasting and communications but should have no impact on monetary policy.


Gold prices have continued to make new highs, trading within a whisker of $2,400.  This comes despite the USD strength we have seen and the support seems to be coming from official purchases, such as China’s building of gold reserves.  I read an interesting article yesterday that suggested there was more to China’s gold buying than simply holding the metal, instead it will become part of a plan to move away from dollarisation.  USDCNY remains in the high 7.23s.


China trade overnight showed a $58.5bn surplus which looks healthy enough but was over $10bn lower than expectations and less than half the number reported for February.    


It wasn;t a good night for English teams in the Europa league quarter finals, with Liverpool suffering a heavy 3-0 defeat at the hands of Atalanta and West Ham losing 2-0 to Bayer Leverkusen.  Plenty of work for both teams to do in the second leg.  Aston Villa managed a 2-1 win against Lille in the Europa Conference quarters.  I’m hoping English teams do well as it may mean an extra Champions League place for English teams next season, which in turn would take some of the heat off Spurs needing a top four finish.  Spurs take on Newcastle in the 12.30 match tomorrow.


In golf, big hitter DeChambeau leads the Masters by one shot over Scheffler.  Some players didn’t manage to finish their first round after the start was delayed for thunderstorms.  This means many will have to finish their first round and then go straight into their second round.  I know they are all quite fit these days and they don’t have to drag their own bag around but even so that is enough to make life a little uncomfortable.  They may not even have time for a couple of pints and a sandwich at lunch time. 


One other sporting event this weekend is the Grand National.  I’m not a huge horse racing fan, much to the disappointment of my eldest who is quite a fan and would dearly love me to own a couple of race horses.  I’m not actually suer if the Grand National really appeals to horse racing fans in the same way that it appeals to the rest of the nation.  It is one of the biggest days in the bookies calendar that’s for sure. 


To pick a winner you might as well draw a name out of the hat.  Each way bets or top 4/6 place finishes are safer if you’re more into not losing money.  Looking at the names, I Am Maximus is pretty cool, while Delta Work leads me to think of options trading, something that as you know is a big part of our business.  Otherwise, Rachel Blackmore on Minella Indo could be worth a flutter.  Do bear in mind though that my knowledge of racing is minimal and should only be taken with a pinch of salt.


Could be a decent couple of days over the weekend weather-wise.  Might even hit 20°c today.  I’m in the Isle of Wight later today to see some clients, friends and acquaintances, must remember the sunglasses and suntan lotion… 


Have a great weekend as and when it comes.


-  12.00 BoEs forecast report

-  12.00 ECBs Elderson speaks

-  15.00 US michigan sentiment survey

-  19.30 Feds Bostic speaks

-  20.30 Feds Daly speaks



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