Good morning
Here we are, already in the middle of November. I just have no idea how this year is going by so quickly. Time flies when you’re having fun I guess!
We had a bit of a rollercoaster day yesterday. The US dollar pushed higher initially with GBPUSD reaching 1.2630 and EURUSD breaching 1.0500 by a handful of pips. These moves reversed through the afternoon with some decent USD selling, by the London close we had reached highs of 1.2720 and 1.0580. GBPEUR was stable throughout the session, holding within a few pips either side of 1.2025.
This weakness in the USD was all the more interesting given it came despite US PPI coming out not only firmer than expected but also with upward revisions to the previous month. The data did actually stem the USD selling for a few minutes, but the theme continued thereafter.
Fed’s Powell then caused yet another reversal in the US dollar, his rather hawkish comments led some to even questions whether we’d see a rate cut at all from the Fed in December. Powell’s focus seemed to be more on inflation than the labour market, making it clear that the battle on inflation could be damaged if rates are cut too quickly, although adding that the Fed risk harming employment and the economy if they keep rates too high. Powell, and other Fed officials such as Kugler and Barkin, all mentioned the resilience of the labour markets. They will be in no hurry to cut rates, odds on a Dewc move are now around 50/50..
After Powell, GBPUSD traded back down to the mid-1.26s, EURUSD to around 1.0515, not quite hitting the lows seen earlier in the day but certainly reflective of the potentially slower Fed easing.
BoEs Bailey was also speaking yesterday evening. He spoke less on policy, more on general trade matters, urging the UK to not respond to tariffs from other countries with tariffs of our own. He also said he endorsed Reeves investment plans for the UK. Both Bailey and Reeves have called for UK to rebuild ties with EU ahead of the possible introduction of US tariffs on both European areas. Reeves did confirm her plans to reform local government pension funds into ‘mega-funds’ which could be used to boost growth.
This morning, UK GDP was disappointing, with Q3 GDP coming in at just 0.1%, lower than expectations which were already pretty dismal. Some are blaming the uncertainty ahead of the election. GBP shifted a touch lower on the announcment.
USDJPY hit as high as 156.75 overnight, some 400 pips higher than the start of the week, but comments from Japan’s Kato about excessive Yen moves plus the announcement of a BoJ press conference on Monday were enough to turn the tide a little, USDJPY trading down to 155.60. There is some feeling the Ueda will take the opportunity to talk about Yen weakness although it has been noted that an address by the BoJ governor is not uncommon around this time of year.
CAD has weakened against USD, no great surprise given that most other major currencies have shared the same fate, but for CAD I think it is slightly different. USDCAD is now 1.4060, the highest level since May 2020 when Covid was having huge market impact. Goldmans have said they now look for a BoC rate cut of 50bps in December, from 25bps previously.
Gold had traded down to US$2,540 yesterday morning, not far off 10% down from the historic highs seen at the end of October and the lowest level for two months. The late USD selling did drag gold back up to $2,575, still supported by the ongoing Middle East conflict and of course from the ongoing buying by China, and now perhaps by other BRICS countries as well.
England football team looked more convincing yesterday evening as they beat Greece 3-0, the goal difference enough to put England on top of their group B league. England play again on Sunday, taking on Republic of Ireland. England’s cricket team have won the latest T20 match against the West Indies, giving them an unassailable 3-0 lead in the series of five matches. They play again tomorrow.
Meanwhile Englands rugby team face South Africa tomorrow. After being beaten by both New Zealand and Australia, I can’t say I’m hopeful against the reigning world champions. The bookies have the Springboks as odds-on favourites which is no great surprise.
One of the more intriguing sporting fixtures takes place in the early hours of Saturday morning. Mike Tyson takes on Jake Paul in a heavyweight boxing match. Tyson is 58 years old and in incredible shape ahead of the match, Jake Paul started out as a YouTuber but has gained serious boxing credentials over the past few years. Really difficult to see how this is going to go. Paul is younger and must surely be fitter, while Tyson is a seasoned professional although of course his age makes us question whether he really should be getting back into the ring at all. Both will earn good money, somewhere between $20 and 40 million each, so you’d think neither will be too upset if they lose. But that is not how boxing works. Both are out for blood. Unless of course it has been agreed to stretch the match out to please the vast number of viewers who will be watching it on Netflix.
I’m thinking today may be a little calmer than the last few days although US retail sales this afternoon may well push USD around again. As I type GBPUSD is 1.2665, EURUSD 1.0570, which leaves GBPEUR back below 1.2000 after the GDP release, now 1.1980.
Have a great weekend, it should be a dry one. It won’t be too warm but it will certainly be warmer than next week when we’re expected to get overnight temperatures below zero for the first time in, well, I don’t know how long. No surprise that I’ll be clearing more leaves, although there are noticeably less left on the tree now so perhaps my work there is nearly done.
- 13.30 US retail sales, NY empire state manufacturing index
- 14.00 Feds Collins speaks
- 14.15 US industrial production
- 15.00 ECBs Lane speaks
- 15.15 ECBs Cipollone speaks
- 18.15 Feds Williams speaks
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