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  • richard evans

GBP holds post-CPI gains, Sunak announces general election on 4th July

Good morning

 

Well it was another pretty quiet day yesterday after the initial flurry over the UK inflation numbers.  GBPUSD held above 1.2700 for most of the day and finished around 1.2735, GBPEUR got as high as 1.1760 but failed to break higher, just as it has done on every attempt since Sept 2022.  GBPJPY still in the 199’s and GBPAUD worked its way up to near 1.9200 through the course of the afternoon.

 

Goldmans have said they now see a BoE rate cut in August, that has been pushed back a couple of months after the UK inflation report, although this is still earlier than many expect.  FOMC minutes came across mildly more hawkish than Powell’s press conference after the last Fed meeting but given we have had US inflation numbers and a healthy supply of Fed officials speaking since the meeting they are slightly out of date.  Goldmans don’t see any rate cut from the Fed in 2024.  ECB officials continue to point to an ECB cut in June.

 

It’s a busier calendar today with EU, UK and US PMIs which do have the potential to move the markets.  We also have the Turkish rate announcement at midday, to be honest we don’t do much Turkish Lira at the moment but with interest rates at 50% and inflation near 70% I’m just intrigued more than anything.  They are expected to keep rates on hold today.

 

UK PM Rishi Sunak has called a general election for 4th July.  That doesn’t give the Tories long to turn around what is expected to be a bit of a landslide victory for Labour.  According to Betfair, the Tories are expected to lose over 200 seats after something of a disastrous few years.  Labour obviously favourites but I think it will be interesting to see how the marginals and independents fare.  The turmoil in immigration and the soft stance against a lot of the recent protests could play into the hands of the Reform Party.  I do have to be a bit careful what I say here as we all know how easy it is to cause unintended offence, but i do wonder whether the Tories, if they play their cards right, could do a bit better than expected by playing something of a harder line.   Immigration and the Rwanda plan is likely to be at the heart of this election. 

 

The announcement of the lection has had little impact on GBP, GBPUSD now 1.2730, GBPEUR up at 1.1760, knocking on the door of those key upside levels, although option volatility levels are a touch higher.

 

Across the pond, Trump is currently favourite to retake his post as President in November according to the bookies, indeed I read somewhere that his odds are the shortest ever in the battle for Presidency.  I’ll say it again, some 350 million people and Trump and Biden are the best candidates they can find? 

 

China have been conducting their largest military drills for over a year around Taiwan, this time pretty much encircling it, proof if needed that they would be able to cut off Taiwan from the rest of the world as and when it chose to.  Taiwan have reacted with a bit of a shrug of the shoulders and seem happy to maintain the status quo, but China’s intentions are pretty clear. They do not want Taiwan to believe independence is ever possible.  Elsewhere, UK are reporting that China have sent weapons to Russia for use in Ukraine, which would mark something of a change.  The US are so far saying they have not yet seen a transfer of weapons.  In more comforting news, China, Japan and South Korea are due to hold talks for the first time since 2019.

 

Congratulations to Atalanta for winning the Europa League final last night, in doing so ending bringing an end to Bayer Leverkusen’s unbeaten run this season.  Nothing particularly exciting sport-wise over the next couple of days but we do have the FA cup final on Saturday and the all-important (for Mark) Championship play-off final to decide whether Leeds or Southampton will be playing in the Premier League next year.  Still, we’re not there yet, still have to get through the rest of the week before we can consider enjoying the long weekend.

 

Have a great day, its stopped raining here for now.  Yesterday was just constant rain and drizzle but not the deluge that some saw.  Its still cold but should warm up a little by the weekend according to the BBC.  Mind you, I hope they are wrong.  They are now forecasting rain for my golf trip next weekend. 

 

-  09.00 EU services, manufacturing PMI

-  09.30 UK S&P services, manufacturing PMI

-  12.00 CBRT rate announcement

-  13.30 US initial jobless claims

-  14.45 US S&P services, manufacturing PMI

-  15.00 US new home sales

-  15.00 EU consumer confidence

-  20.00 Feds Bostic speaks

-  23.25 RBNZs Orr speaks

-  23.45 NZ trade balance

-  00.01 UK GfK consumer confidence

-  00.30 Japan CPI

-  07.00 UK retail sales

 

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