Good morning
Most majors did their best to hold gains against the US dollar, GBPUSD traded within a tight 1.2620-1.2640 range through most of yesterday and again overnight, EURUSD has actually steadily made up a little bit of ground, trading up to the 1.0780’s which has seen GBPEUR lip back just a few points to 1.1715. So GBPUSD is now back in that 1.26-1.28 range that we’ve seen since mid-Dec, the question is whether the post-nonfarm USD strength will be repeated or are we destined to spend another few months in the same ballpark.
Yen is one of the few currencies that has failed to make gains against USD, indeed USDJPY is currently trading at 148.80, right at the top of the range we have seen since Nov 2023. This comes despite ongoing talk of a potential move away from negative interest rates. Perhaps dovish comments from BoJs Uchida were to blame, he said that even if they did end negative rates there would be no rush to raise rates further and policy would still remain highly accommodative.
With the threat of a regional banking crisis driven by exposures to commercial real estate looming over the US, it may be difficult for the US dollar to hold gains. However Bloomberg have reported that Germany’s Deutsche Pfandbriefbank has seen its bonds and shares slump in price over similar concerns so this may not be restricted to just US banks, remember as well I mentioned Japans Aozora Bank which reported its first loss in fifteen years due to making provisions on loans. We are still being told that the problems are manageable, indeed the NY Community Bancorp shares ended with a bit of a rally off the lows
We have a host of central bank officials speaking today who will be looking to offer their opinions, I don’t expect much from Fed officials other than ‘no cuts right now, but perhaps two or three later in the year’. The Fed have been quite united in their comments recently. The same probably won’t be said for BoE officials where we still have some members looking for rate rises, while others are looking for rate cuts. We hear from Mann today, she is a known hawk and one of the two members who voted for a rate rise at last weeks meeting. We also hear from ECBs Lane, can be on the dovish side, but we’ll see if he echoes any of the concerns raised by Schnabel yesterday who suggested a rate cut in June rather than April could be more appropriate.
In the Middle East there is no sign of a ceasefire between Israel/Hamas. Hamas rejected the Israeli proposal, and then offered a series of demands of their own which are unsurprisingly not acceptable to Israel. It looks like the conflict there will continue. Meanwhile, the fear of contagion is growing with US drone attacks on Iran-backed militia leaders through to be behind the recent attack in Jordan that killed three US troops. No surprise that oil prices have been pushing higher this week.
UK house prices are always a hot topic. Rightmove have reported the number of sellers contacting estate agents has risen some 23% since last January, while the number of listings has grown by some 13%. They seem to suggest this is a good thing, but surely in a market where the numbers of sellers increases, prices must surely fall. RICS have said that the number of new buyer enquiries has reached the highest level for two years, so perhaps its not all doom and gloom.
An amber warning of snow has been issued for some area, leading to a few school closures in North Wales ahead of what could be a decent smattering of snow. We’re not talking the 1-2cm that still manages to bring disruption, but perhaps up to 15cm. I’ve not seen decent snow for a while, certainly not enough to close schools. I’d have thought schools would just run online these days if need be, but there’s nothing better than sledging down the local hill when you’re a kid so maybe they’ll give them a day off. No such luck here, its very wet and miserable and forecast to get wetter.
Finally, Chelsea showed they still know how to play football by beating Aston Villa in the FA cup to set up a match with Mark’s team, Leeds, at the end of this month. Chelsea boss Pochettino keeps his job for a little longer.
Stay warm or dry, or better still, both.
- 09.00 ECB economic bulletin
- 10.45 ECBs Vujcic speaks
- 11.30 ECBs Wunsch speaks
- 13.30 US initial jobless claims
- 14.15 ECBs Elderson speaks
- 15.00 BoEs Mann speaks
- 15.30 ECBs Lane speaks
- 17.05 Feds Barkin speaks
- 22.30 RBAs Bullock speaks
- 07.00 German HICP
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