Good morning
US inflation came out bang in line with expectations yesterday which initially sent USD a touch lower but it wasn’t long before that move reversed and USD pushed higher. GBPUSD had been up to 1.2780 but slipped to 1.2740, EURUSD traded from its 1.0535 high to 1.0485, and GBPEUR ticked higher once again to 1.2150. USDJPY took advantage of the slightly stronger USD, trading up to 152.60 helped by reduced expectations of a BoJ rate rise this year. As I type GBOUSD is back up to the 1.2770 area and EURUSD has made it back above 1.0500, now 1.0520,
BoC did cut rates by 50bps to 3.25%, CAD actually managed to make small gains against USD after the announcement, with USDCAD moving down from 1.4180 to 1.4135. GBPCAD traded down 100 pips from 1.8105 to 1.8005 but has since worked its way back up to 1.8065 or so. BoC did signal a return to more gradual rate cuts which could mean either cuts of 25bps or perhaps more pauses in cuts through 2025.
Aussie employment knocked those who were starting to think a Feb rate cut was on the cards, coming in stronger than expected with full time employment up over 52,000, while the unemployment rate dipped to 3.9% when it had been expected to rise to 4.2%. AUD jumped higher, with AUDUSD now 0.6420 from a low yesterday of 0.6340, while GBPAUD dropped from 2.0000 before the announcement to 1.9880.
Gold traded up to $2,726 overnight, surpassing the Nov high and now casting a beady eye on the October highs. There has been talk of a Hamas/Israel ceasefire deal, in the past this would probably have been enough to send gold lower but with global unrest at quite elevated levels, and of course with China still adding to their holdings, we can understand why gold prices remain firm.
Today brings the ECB rate meeting at which it is expected we’ll see a 25bps rate cut, a move that has been forecast for some time now and it would be a huge surprise if we saw anything else. It is also unlikely Lagarde will say anything too out of the ordinary, we are expecting more of the usual ‘gradual rate moves and data dependency’ sort of talk. EUR still struggling with French and German government issues, as German Chancellor Scholz did request a confidence vote which could take place this coming Monday. Ukraine war, NATO funding and Russian meddling in European affairs is also weighing on the single currency.
This morning we also have the SNB rate announcement, a 25bps cut is expected which would take rates to a lowly 0.75%. There has been some talk of a larger 50bps cut which could mean we see a little CHF strength on a 25bps cut. GBPCHF now 1.1265.
Today also brings the next US inflation number, this time in the form of PPI which usually comes and goes with little fuss but can move the markets from time to time, particularly coming so close as it is to next weeks FOMC rate meeting.
Arsenal won their champions league match yesterday but Man City lost yet again, this time to Juventus. Spurs face a touch trip to Rangers this evening while Chelsea make the 16 hour round trip to Kazakhstan where they will face Astana in temperatures that could get down to -10°c. You’re truly a real fan if you make that away trip!
Low temperatures are unlikely to be an issue for the 2034 world cup, which will be held in Saudi Arabia. I’d imagine it will be similar to the Qatar tournament which went well but not without controversy and many difficulties for travelling fans. Still, they have ten years to get it right, I presume it’ll be held in our winter again given the excessive heat during the summer.
Finally, the GCHQ quiz was disappointingly straightforward yesterday. I struggled with one questions but worked out the final piece of the puzzle by a matter of deduction. I did feel a bit smug but then had to remind myself this is really designed for school children. There are other puzzles on the GCHQ website to try which serve to remind me that I’m not quite as good at these things as I perhaps imagine.
Have a great day
- 08.30 SNB rate announcement
- 09.00 SNB press conference
- 10.30 INR CPI
- 13.15 ECB rate announcement
- 13.30 US PPI, initial jobless claims
- 13.45 ECB press conference
- 21.30 NZ business PMI
- 23.50 Japan Tankan
- 00.01 UK GfK consumer confidence
- 07.00 UK GDP, industrial production
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