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Further USD weakness overnight

Good morning

Weaker than expected EU confidence numbers yesterday morning sent EURUSD lower from 1.0220 to 1.0115. GBPUSD was dragged lower by default to 1.2105 although GBP still held gains against EUR, with EURGBP down at 0.8350 (GBPEUR 1.1975). US GDP then came out at -0.9%, lower than even the most bearish estimates, putting the US in a technical recession, which gave the market more reason to sell dollars and both EUR and GBP made back some ground. Yellen was quick to suggest US is not in recession if job creation, household finances and consumer spending are taken into account, but two negative GDP readings still make a recession.

Overnight we saw continued USD selling across the board. EURUSD climbed to 1.0250, GBPUSD to 1.2235 and Gold to $1767. The main move however was in UDJPY which fell from a high yesterday morning of 135.75 to mid-134’s, then overnight renewed selling sees USDJPY now down at 132.70. EURJPY slips to 135.85, GBPJPY down to 162.25. Remember USDJPY was up in the mid-137s earlier this week. Much larger than average volumes were reported

Powell made it clear future Fed decisions would be largely dictated by incoming data. This afternoon we have PMI data but also the PCE deflator which we know is watched. Powell also made reference to the employment cost index which we also see at 13.30, not one of the main releases but seems to be quite high on the Feds watch list. For the record market looks for 1.2%, was 1.4% last time. A high number could see a bit USD strength.

Biden spoke with Xi yesterday as tensions over Taiwan remain high. Xi made it clear China opposes Taiwanese independence, and does not appreciate any external interference. With Pelosi due to visit any time soon and a US aircraft carrier group entering the South China Sea, the chance of the tensions escalating look pretty high. No mention of removal of tariffs.

Sorry to see Bernard Cribbens passed away yesterday. Anyone my age or thereabouts will know him, in fact it feels now as though he was in everything, from Wombles to Doctor Who to Carry On to Jackanory to Fawlty Towers, not to mention appearing in the classic ‘Railway Children’. At 93 its fair to say he’d had a good innings.

I’m not sure what to make of Centrica (British Gas) announcement that it will pay a dividend to shareholders after reporting profits of £1.34bn in the six months to June, up from £262m a year earlier. Now, I am not daft, nor am I a communist, I do know companies need to keep their shareholders happy and indeed have a duty to be profitable and sustainable. However I do struggle with the notion that we are all facing exceptionally high bills, due I know to high commodity prices, but also surely elevated pricing from our suppliers such as British Gas.

Commonwealth games begins today and goes on for just over a week. Believe it or not the football season also starts, the Championship kicks off this evening, with Huddersfield taking on newly relegated Burnley. We still have to wait another week for the Premier League to start. Can’t say my wife is too impressed that life will be transformed once again into a world of football.

It’ll be August when you get your next update, where on earth did those last seven months go?

- 10.00 EU GDP, HICP

- 13.30 US personal income, spending, Core PCE

- 13.30 CAD GDP

- 14.45 US Chicago PMI

- 15.00 US Michigan sentiment survey

- 20.30 CFTC positon data

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