EU political and fiscal worries send EUR lower
Good morning
US nonfarms on Friday surprised to the downside which took a bit of a shine off the US dollar. The headline came on at +29k while previous readings were also revised lower. GBPUSD pushed up 40 pips or so from its lows around 1.3200 to 1.3240, EURUSD saw a similar sized move from 1.1225 to almost 1.1265 while USDJPY dropped 75 pips from 157.70 to 156.95. Weaker factory orders data later in the afternoon gave another reason to sell the US dollar, GBP and EUR reached 1.3255 and 1.1285. The data reduced the likelihood of a Fed rate rise this month, which in turn send Nasdaq to record highs.
Since the open last night we have seen the USD sell-off unwind, GBP dipped to below 1.3200 before recovering to 1.3225, EUR has been hit harder, seeing a low so far of 1.1165 which has helped GBPEUR break 1.1800 for the first time in about three months. So far we have been as high as 1.1823, just a few pips below the July high. We have to go back to June last year for levels above that. French fiscal worries and ongoing of fears of contagion in EU government bond markets is leading the EUR decline, but there has been talk of a possible early election in Spain which will only add to political uncertainty in the EU area.
Brazil is facing second round elections after the right wing Bolsonaro secured some 47% of the vote, beating Lula, the current President, who secured only 45%. Bolsonaro is the son of the former President Jair Bolsonaro who was jailed after trying to start a coup after losing the 2022 election. The next ro0und will be 25th October.
In the Middle East, the Yemen government has launched attacks on Houthi positions in attempt to regain control amid the Houthi attacks on Saudi Arabia. There is some thinking that the US aircraft carrier en route to the Middle East could be utilised to help Saudi Arabia min its efforts against the Houthis, something the US have so far refused. Meanwhile the US have moved B1 bombers from RAF Fairford, a move that has surprised many but follows the recent security incident and subsequent US criticism of UK’s decision to release suspects on bail.
Close to home, the UK are considering tariffs on China electric vehicles to match EU rules. EU are concerned that UK could become a gateway for cheap EV’s entering the European market and are demanding the UK take action in order to remain in the ‘Made in Europe’ initiative.
In other news, England’s footballers put on a stunning performance in their 7-0 demolition of Croatia at the weekend. Typically, I was out and couldn’t watch the match but I am told that we were quite formidable, particularly in attack.
I have started watching Traitors. It’s the first time I have watched the show, I know so many people who talked about how much they enjoyed previous series so we thought we should join the party. The show’s organisers must have been livid with Richard E Grant for disclosing his ‘Traitor’ status within minutes of the start. What a buffoon. Anyway, having caught up on the first two episodes I can see the attraction but it’s all very slow. I presume it livens up a bit as the game goes on.
There is plenty going on at the moment that suggests the world is not in a good place. But one piece of news really caught my attention. Some areas in the UK are being offered potty training classes for their children in an effort to ensure they are properly prepared for schooling. Now, we have had three children, none of whom had any issue by the time they went to school, nor did any of their classmates as far as I am aware. What has happened to parents in the last 20 years that means they now need courses on how to help their kids? And how much do these courses cost the taxpayer? It is, for me, another example of how people just assume the state will take care of their responsibilities. No wonder we’re in a mess.
Have a great day…
- 10.00 ECBs Schnabel speaks
- 11.40 ECBs Escriva speaks
- 14.45 US S&P composite PMI
- 15.00 US ISM services PMI
- 22.00 NZ NZIER business confidence
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