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Eyes on key inflation report from US this afternoon, UK data follows early tomorrow morning

Good morning

UK unemployment this morning was on the very slightly softer side, with average earnings lower than the previous month, with the unemployment remaining the same as last month, but we did see a slightly lower than expected change in the claimant count. GBP popped a touch higher on the release, but we’re only talking a few pips. Still, GBPUSD is now 1.2295, up over 100 points from Fridays low and GBP is also a little better against EUR with GBPEUR now coming in at 1.1485.

EURUSD seems comfortable around the 1.0700 area for the time being, while we await EU’s GDP release which is expected to come in pretty much the same as last time. German ZEW is out at the same time but this hasn’t really been a major market mover for a while now,

Some excitement in USDJPY which traded to 151.90 yesterday afternoon but saw a pretty sharp sell-off that took it to 151.20 just after option expiries, not sure what positions came off but the move must be more option-related than intervention. Since then it has traded between 151.60 and 151.80, the market well aware that Japan intervened on the approach to 152.00 in Oct 2022. Japan have been reasonably restrained with their verbal intervention recently, we do get the odd ‘we are watching’ or ‘will act if needed’ but we’ve had nothing to suggest they are taking it to the next level. There is a thought that Japan have given up the fight against the upside USDJPY trend although they would act to slow yen depreciation. We likely really needs a change of the ultra-loose monetary policy that Japan has had for some time now, plus some Fed rate cuts, to see serious shifts to the downside in USDJPY.

On the subject of US interest rates, I mentioned yesterday that JP Morgan and Goldmans were both looking at US rate cuts for next year, JPM expecting more than Goldmans. UBS have now joined the party, suggesting we could see rate cuts from the Fed as early as March next year. The market doesn’t agree yet, looking more at the Goldmans idea that we’ll have to wait a year from now to see the first cuts. Do bear in mind though that if the US are cutting rates it does not necessarily mean a weaker USD. What other central banks do is of course key. It is difficult to imagine a scenario where US cuts but UK and EU are not able to do the same.

We will have the latest US inflation numbers out this afternoon, they are expected to show further declines which in turn would support the idea of rate cuts. In the early hours of tomorrow morning we will have the UK inflation release. Both US and UK headline numbers are expected to have been helped by lower gas prices, or perhaps more by the idea that the sharp price rises over a year ago are now slipping out of the annual rate. However the core inflation on both sides of the pond could prove more sticky which poses an ongoing problem for policy-makers.

Another issue the US are facing, once again, is the threat of a government shutdown. We’ve had this so many times in the past that the threats seem to come and go, a deal that kicks the can down the road always seem to come at the last minute, that last was only back in early October this year when a funding deal that took us to 17th Nov was agreed. That is now only 3 days away and a shutdown could get the credit rating agencies to look again at the US, remember Moodys put US outlook to negative last week and will be watching the funding talks closely to see if any further revisions are necessary. Watch this space.

UK politics was at the fore yesterday, Suella Braverman was out, replaced as Home Secretary by James Cleverly, who in turn was replaced by David Cameron as Foreign Secretary, a surprise appointment but possibly a pretty clever one, Sunak desperate to stabilise things. I know Braverman was not everyones cup of tea and has sometimes made comments that are inflammatory, but there is something refreshing about a politician who dares to speak their mind.

One of my favourite comments of hers was ‘toku-eating wokerati’ referring to those she saw as supporting eco-protestors such as Extinction Rebellion. Her immigration policies were not to everyones taste, her job was not to please everyone but to deal with a very difficult and emotional issue. She was a daughter of immigrants who integrated successfully into our society. Her comment in September about our current immigration highlights the difference between her experiences and those we see now. ‘Multiculturalism makes no demands of the incomer to integrate. It has failed.’

She was outspoken about the pro-Palestinian marches that took place, describing them as hate marches rather than peaceful protests. I can’t say I fully disagree, although having not been there I am only guided by what I have seen in the press. Like her or loathe her, I think many ‘normal’ people will agree with some of the things she has said. I don’t think we’ve seen the last of her.

We haven’t seen the end of this miserable weather either. High winds yesterday seem to have managed to blow every spare leaf into my drive. I don’t know how the neighbours manage to keep their drives so clear while mine collects anything and everything. The garden I can understand better as the leaves come from my own trees so I can’t complain about that too much. There’s a lot of clearing up to do mind you, and the trees still look full of leaves. I wonder if I can find someone to help. Suella has some time on her hands now…..

- 07.45 SNBs Jordan speaks

- 08.00 Feds Williams speaks

- 09.30 BoCs Gravelle speaks

- 10.00 EU GDP

- 10.00 German ZEW

- 10.30 Feds Jefferson speaks

- 13.30 US CPI

- 13.45 BoEs Pill speaks

- 17.45 Feds Goolsbee speaks

- 23.50 Japan GDP

- 02.00 China retail sales, industrial production

- 07.00 UK CPI, RPI, PPI

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