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Feds Powell casts doubt on US rate cuts, but GBP up after UK inflation numbers

Good morning


It was an interesting day in the currency world yesterday, the US dollar weakened a little through the morning, pushing GBPUSD up to 1.2470 and EURUSD up to 1.0650, but those moves reversed through the afternoon, and a hawkish Powell sent USD higher still after the London close, taking GBPUSD and EURUSD down to 1.2405 and 1.0600 respectively.  


He mentioned the lack of progress on inflation so far in 2024, perhaps suggesting his previous ideas that Jan and Feb numbers were just a bump.  He also made it clear that Fed can only consider rate cuts if inflation falls.  The divergence in Fed and ECB views is clear, as Lagarde yesterday spoke of the potential for a June cut by ECB.  Even BoEs Bailey said that UK could well be cutting rates before the US.


USDJPY had an odd move lower, moving from 154.75 to 153.90 in a straight line but did work its way back to the 154.60 area.  The move was unexplained but is perhaps a sign of how nervous the markets are when it comes to certain yen moves.  CITI see 155.00 as something of a line in the sand for BoJ


Canadian inflation was pretty much in line with expectations yesterday, but with core coming in at 2%, down from 2.1% last month, CAD did see a bit of weakening which drove USDCAD to 1.3840 from 1.3780.  USDCAD now is 1.3820, having held above 1.3800 ever since the release.


NZ inflation overnight looked like it was heading in the right direction, coming in at 4% from 4.7% last time.  However the emphasis by RBNZ on non-tradeable inflation which accelerated sharply has helped NZD push higher after the release, not substantially but certainly a lot more than the headline would suggest is reasonable.  RBNZ will be on guard so watch for any hawkish talk from them in the coming weeks.   


GBP made gains after this mornings inflation release.  Both the headline and core reading were lower than last month but not quite as low as had been hoped.  GBPUSD has so far reached 1.2470, and with EURUSD holding around 1.0625, GBPEUR crept a little higher to 1.1735.


We’ll see EU inflation numbers later this morning, the rest of the calendar today is filled with a plethora of central bank officials speaking.  I’m out and about again visiting both existing clients and new clients, one of my favourite parts of this job although I’d prefer it to stay dry while I’m driving around.  We were hit with another deluge of hail yesterday, quite fun to watch but I’ve had enough of it given its now mid-April.   Nothing on the forecast to suggest it’ll get much warmer over the next week or two although as I type the sun is shining.


By now you are aware of my dislike for water firms, but I saw an article yesterday, not exactly certain when it was actually from, of the boss of United Utilities being asked about profits made (£300m) and dividends paid (452m), while trying to explain why it was reasonable to allow thousands of litres of waste flow into lake Windermere.  Their suggestion that they have invested some money over the years certainly didn’t make up for the amount of waste leaked and the incredible dividends paid.  I’ve not personally verified the numbers I’m quoting but I don’t really need to.  The lack of investment in infrastructure by water companies while paying away substantial sums to shareholders is nothing short of criminal.


In sport, the champions league saw a turnaround from the first legs in yesterdays matches with PSG and Dortmund overturning defeats in the first leg to beat Barcelona and Atletico Madrid to make it through to the semi-fianls.  This evening sees Man City and Arsenal in action against Bayern Munich and Real Madrid respectively.  Both first legs ended with scores even after some incredibly exciting football. Hoping for more of the same this evening.


Rory McIlroy has denied reports he could look to move to LIV golf in a deal rumoured to total around US$850m.  His strong anti-LIV stance would make such a deal unusual although there does come a point where the money is so large it is difficult to say no.  There is doubt over whether the claims were ever true but that never stopped anyone making a good story.  No smoke without fire mind you


Ah, speaking of smoke, the government, with cross-party support, have passed new laws that will make it illegal for anyone born after 2009 to buy cigarettes, although the act of smoking itself will not be outlawed so there would be nothing to prevent those people buying cigarettes overseas and bringing them into the country.  Not sure where I stand on this.  There is no denying that smoking is bad for the smoker and indeed for people around the smoker, but I’m not sure it is the governments job to tell us what we can or can’t do.  Well, I say that, but some substances are already banned so I guess it’s nothing new.  New Zealand tried to bring in a similar law but then overturned it late last year.  No doubt this will be a talking point for some time to come.


One more talking point is the weather in Dubai.  I might complain about rain here but we are used to it.  Anyone heading to Dubai for some winter/spring sun be warned.  The area has been hit by torrential rain, one years worth in just one day.  Flights were have been diverted as the airport was under water, and images show roads flooded, and cars homes partially submerged.  Other parts of UAE are also affected.    


That’s all for now, I have to get on the road for my meetings.  Have a great day…



-  10.00 EU HICP

-  13.05 BoEs Greene speaks

-  14.00 ECBs Cipllone speaks

-  16.45 ECBs Schnabel speaks

-  17.00 BoEs Bailey speaks

-  18.45 ECBs Lagarde speaks

-  19.00 BoEs Haskel speaks

-  19.00 Fed Beige book

-  22.30 Feds Mester speaks

-  00.15 Feds Bowman speaks

-  02.30 AUS unemployment

-  02.30 AUS NAB business confidence


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