Good morning
Quiet day yesterday, USD up a bit, GBPUSD traded down to 1.2725 and EURUSD hit 1.0500, while USDJPY traded up through 152.00 which brought GBPJPY up to 194.00.
EUR is struggling at the moment. We’ve seen political issues in France, now the German Chancellor Scholz is reported to be about to request a confidence vote today which, if he loses as is expected, would lead to new elections in February. EURUSD is around 1.0490, GBPEUR now at 1.2140, the highest level since March 2022 at which time we go up to around 1.2190. Beyond there we’re looking at levels not seen since as far back as 2016.
Through 2015 and part of 2016 GBPEUR traded as high as the mid-1.44s, I don’t want to be one of those who makes outrageous market calls but Euro sellers should just be aware that although we are at or near multi-year highs, this is not really unchartered territory and I’d suggest some caution just in case a larger move does develop. On the positive side the forward points remain firmly in favour of EUR sellers so although the spot rate looks undesirable, forward rates do ensure some discount.
EUR buyers on the other hand should be sitting pretty and even though forward points are against them they could probably still hedge forward at something around 1.2000 if they didn’t want to go too far out.
Aussie employment numbers overnight were on the weaker side, sending AUD lower again as rate cut expectations for Feb build. GBPAUD spiked as high as 2.01 this morning although is now a touch lower at 2.0050. NZD is also weak, this morning NZDUSD traded as low as 0.5765, a two year low, while GBPNZD is only a few pips short of 2.21, the highest since Feb 2016.
I mentioned gold earlier this week, at the time it was $2,645, off the lows helped by news that China had started to add to their vast holdings once again. It has continued to trade higher, reaching a high of now $2,704 overnight and with the Chinese buying plus the ongoing issues around the world including Ukraine, Gaza, Syria, Iran and Taiwan I would not be at all surprised to see a retest of the Nov highs ($2,720) initially with half an eye on the Oct highs around $2,790, particularly if we were to see a dovish Fed next week.
US inflation numbers will be the highlight today, potentially giving a clue as to the Feds rate decision next week, especially as we are now in the Feds blackout period. Today also brings the BoC’s latest rate announcement, a 50bps cut is expected, following a 50bps cut in October and 25bps at the three preceding meetings. The 50bps cut must be priced in, so the key will be whether BoC mention any slowdown in pace or size of rate cuts. USDCAD is now 1.4165 having traded a high of 1.4185 yesterday, the highest we’ve been since April 2020. GBPCAD hit 1.8090 yesterday marking the highest level since April 2018.
So far then, GBP is making highs against various currencies, including the Euro. The question is whether British football teams can also reach highs against their European counterparts. Well, Liverpool won their Champions League match last night, now the only team to win their opening six matches. Aston Villa also won to boost their hopes of reaching the knockout stages. Arsenal and Man City play this evening.
I’ll be in trouble with Mark if I don’t mention Leeds Utd, who have climbed again to the top of the Championship after a 3-1 win over Middlesbrough last night. Sheffield Utd need to beat Millwall this evening, never an easy place to go, if they wish to regain the top spot.
If you find any spare time today, GCHQ will be releasing their annual Christmas Challenge. This is really designed for schools but don’t be fooled, it isn’t always simple and I have learnt that working in a team greatly increase your chances of success given each question has a slightly different theme. I always like to think I’m going to do well but it doesn’t always work out that way. Take a look at the GCHQ website, avoid searching for the answers online and see how you get on.
Have a great day
- 13.30 US CPI
- 14.45 BoC rate announcement
- 15.30 BoC press conference
- 19.00 US monthly budget statement
- 00.30 AUS unemployment
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