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  • richard evans

Focus on central bank speakers today

Good morning

We awake to a slightly stronger US dollar which has taken GBPUSD below 1.2000 for the first time in almost exactly one month. EURUSD is down at 1.0700 which puts GBPEUR just above 1.1200. The USD strength is down to a couple of reasons, first Goldmans have said they lower their chances of US entering recession in 2023 to 25% from 35%, while Feds Bostic says he sees two more rate rises and, after the strong payroll data last week, doesn’t discount a move of 50bps if need be, perhaps leading to a higher peak rate.

The big move overnight though is AUD, after RBA raised rates 25bps to 3.35% as expected but signalled the likely need for more rate rises in the coming months. AUD pushed higher to 0.6950 vs USD, and GBPAUD dropped from 1.7430 to 1.7340. AUDUSD has since slipped back to 0.6920 but AUD has held most gains vs GBP. Some thinking AUD can benefit further from Chinas reopening.

Todays calendar is filled with central bank speakers from BoE, ECB, BoC and then Feds Powell after the London close. Risks for each seem to be that they sound more hawkish than previously, other than BoEs officials after the recent change of tone from the UK central bank.

With BoE slowing and ECB still looking at rate rises, plus EUR likely benefitting more from a China reopening, I have seen a few downside GBPEUR / upside EURGBP trade ideas from some major banks. Have to admit that I’m in two minds as to whether to look at EUR upside against USD or GBP. With GBP already weak against EUR it is easy to think we may have missed the boat, but I’ll look for some cheapish trade ideas in both that will give some upside EUR interest over the next month or two.

So, we wait to see what Powell has to say, particularly after the strong employment data last week, while Biden makes his State of the Union address overnight. I’m still fascinated by the China spy balloon story, Biden has said it has not really altered relations between the two superpowers although Kirby (White House National Security Council) has said the incident did little for international relations.

Finally, ending on a sad note, I see the death toll from the Turkey/Syria earthquake has risen sharply from yesterday morning, and is still highly likely to rise with people still trapped under rubble and temperatures reaching below zero overnight. International response has been quick with aid and emergency teams being sent to assist the recovery operations. Of course, TRY has weakened although really this is just a continuation of the trend. USDTRY now 18.825, while EURTRY is 20.175, actually off the recent highs of 20.72 or so.

- 09.00 BoEs Ramsden speaks

- 10.15 BoEs Pill speaks

- 13.30 US goods trade balance

- 13.30 CAD intl merchandise trade

- 15.30 BoEs Cunliffe speaks

- 17.00 ECBs Schnabel speaks

- 17.30 BoCs Macklem speaks

- 17.40 Feds Powell speaks

- 23.50 Japan current account

- 02.00 Biden speaks

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