Good morning
For much of the day yesterday GBPUSD was stuck in a 1.2445-1.2465 range although by the London close it was down at 1.2425. Since then a small bout of USD weakness, led in part by concerns raised by Japan and South Korea over the strong US Dollar, has helped GBPUSD higher again, now at 1.2480, the highest level since Monday. EURUSD has done even better, now 1.0690 which is the highest since last week and has helped push GBPEUR back below 1.1700, now 1.1675. The relative GBP weakness comes as BoEs Bailey confirms inflation is pretty much where BoE forecasts have it and that a larger decline is expected next month.
USDJPY dipped below 154.00 overnight after Kanda mentioned an agreement with other G7 nations that excessive currency moves help no one, and FinMin Suzuki said he met with Yellen and his South Korean counterpart, although the move was short-lived and as I type we are 154.25, 50 or so pips off the recent highs. Dovish comments from BoJs Noguchi who made it clear BoJ must maintain an ultra-loose monetary policy encouraged the market to sell the Yen once again. We’ll see inflation numbers out of Japan tonight.
AUD performed well overnight after what I think looked like mixed employment numbers. The net change was -6,600 having been expected at +7,200 but this did come on higher full-time staff and lower part-time staff. The unemployment rate was a touch higher at 3.8% than last month, which came in at 3.7% although fell short of market expectations of a rise to 3.9%. So if I read these right, they are not great, just not quite as bad as some feared.
We’ve had plenty of central bank speakers this week and there are more to come today, many at the IMF’s semi-annual conference. I’m expecting more of the same really, Fed officials pushing back on the idea of a June rate cut, while ECB officials are still looking at June cuts and ECBs Vasle went so far as to say he sees rates close to 3% by year end, a drop of up to 1% or more likely three or four 25bps cuts.
As each day passes the hope rises that Israel will not retaliate for Iran’s attack a few days ago. We know that nothing is certain and further action by Israel cannot be discounted completely, but for the time being the lack of escalation is helping he markets to some extent. Oil prices are around US$5 off the recent highs with Brent at $87.30 and WTI just above $82. Still, geopolitical events continue to pose the largest risks.
It was a disappointing night for English football as both Arsenal and Man City lost their respective champions league quarter final matches to Bayern Munich and Real Madrid. We have Liverpool and West Ham in the Europa league this evening. Liverpool have a mountain to climb after losing 3-0 in the first leg while West Ham will have to overcome a two goal deficit if they are to proceed to the next round.
With Bayern going through and Leverkusen looking likely to progress, the chance of England getting a fifth champions league place looks highly unlikely. Spurs will have to fight very hard to get that fourth spot. England hopes could be on Aston Villa who hold a goal advantage over Lille in their Europa conference quarter final.
Looks like it could be dry today with temperatures reaching a heady 12°c by the afternoon. Not exactly t-shirt weather and looking at the forecast it doesn’t look like getting much above there for the rest of April. There is of course still rain on the calendar but not quite as much as we’ve had recently. On the subject of rain, Dubai is trying to dry out after the floods they experienced due to huge amounts of rainfall. There has been suggestions that could seeding contributed to the extreme weather, although experts suggest it was a storm that had been well forecast for a few days previously.
Other than the many central bank speakers, the calendar is relatively light. We have US initial jobless claims and the philly fed manufacturing survey, both important but unlikely to drive the markets too far. UK retail sales numbers will be out early tomorrow morning, it is thought they could be disappointing after the wet weather in March.
- 13.00 ECBs Nagel speaks
- 13.30 US philly fed survey, initial jobless claims
- 14.05 Feds Bowman speaks
- 14.15 Feds Williams speaks
- 15.00 US existing home sales
- 16.00 Feds Bostic speaks
- 18.30 ECBs Schnabel speaks
- 20.30 ECBs Nagel speaks
- 22.45 Feds Bostic speaks
- 00.30 Japan CPI
- 07.00 UK retail sales