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Fed to raise 75 or 100bps next week?

Good morning

The dollar continues to trade on a firm footing in relatively light trading overnight as calls for a full 1% rate rise from the Fed next week continue. Even hawkish comments from ECBs Holzmann wasn’t enough to get EURUSD above parity, he said rates will be higher in a years time and that ECB had underestimated he pace of inflation gains. A couple more ECB officials speaking later today. EURUSD now 0.9965, GBPUSD 1.1525, somehow managing to hold above 1.1500 for the time being.

USDJPY is at 143.70, verbal intervention from Japanese officials having very little impact. There is some talk that BoJ may be inching closer to actual currency market intervention but there idea of where their line in the sand may be. We failed to break 145 after the US CPI so this is a potential level, 150 could also be, but really this is just picking out round numbers rather than any having any specific information to work with

Aussie unemployment came in stronger, helping to reverse some of the losses last month, but has had little impact on AUD overall, with AUDUSD 0.6755, AUDNZD 1.1250 and GBPAUD 1.7070.

Gold has suffered since the US CPI release and at $1688 has now slipped below my rising trendline which goes back to April 2020. I mentioned the $1680-1725 range this time last week and said it cannot stay in this ramge for long. It actually broke to the upside but the USD strength now sees it back towards to the lower end of the range. Eyes now on the July low around $1681 and of course $1680.

Sweden’s PM Anderson has resigned as the right-wing parties combined to win a slim election victory. The main party in the current coalition won the highest percentage of votes but the colaaition itself did not win enough seats to stay in power. Support for the Sweden Democrats, regarded as something of an extremist right-wing group, was enough to place them second. It is going to be a difficult time for a new coalition.

I’m out of the office tomorrow so this report will be missing from your inboxes. We will see UK retail sales early tomorrow morning, and US Michigan sentiment survey tomorrow afternoon. We do have a bank holiday in the UK on Monday to mark our respect for the Queen on the day of her funeral. The calendar is pretty light, but the rest of the week is busy. Among the data, we will see rate announcements from BoE, BoJ and the Fed. BoE likely to raise rates, some are seeing 75bps rise which may explain why GBP isn’t lower, BoJ expected unchanged but watch for talk on the level of Yen, and FOMC, well 75bps or 100bps rise is the key question here.

I will wish you all an early ‘good weekend’.

- 10.15 ECBs de Guindos speaks

- 12.00 ECBs Centeno speaks

- 13.30 US retail sales, initial jobless claims, philly fed survey

- 23.30 NZ business PMI

- 03.00 China retail sales, industrial production

- 07.00 UK retail sales

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