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  • richard evans

GBP holds up despite lower UK inflation

Good morning

 

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place last weekend. 

 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

 

This will be until Sunday 31st when we change our clocks in the UK.

 

GBP is holding up pretty well despite UK inflation coming out this lower again this morning, after an initial dip after the release.  Headline CPI was 3.4% against an expected 3.6%, while core CPI was down to 4.5%.  GBPUSD is currently 1.2705, just a few points away from where it was this time yesterday, EURUSD is also pretty much unchanged at 1.0855, putting GBPEUR at 1.1700.  The numbers still won’t be enough to encourage any immediate action from BoE tomorrow but it will be interesting to see whether the hawks such as Mann alter their calls for further rate rises.  Inflation may be lower but I don’t feel any better off.

 

It is a busy day for ECB officials, several are speaking through the day at their conference, no doubt they’ll offer the same ‘nothing until June’ idea, the key will be how many cuts they see through 2024.   I still think ECB are likely to cut rates earlier than Fed and BoE, and also likely to cut more than their counterparts. 

 

Japanese Yen continues to trade lower after the BoJ meeting, USDJPY now 151.50 and GBPJPY up at a heady 192.50, the highest levels since 2015 and perhaps the market is starting to look at the 200 area as a possible target, quite incredible given we were down below 125.00 four years ago. 

 

Later today we have the US Fed rate meeting, expected to remain on hold but the ‘dot-plot’ will be closely watched for any sign that the number of rate cuts this year could drop from three to two cuts of 25bps each, while some members might look for even less, you may remember Kashkari recently hinted that he may now look for just one cut through 2024.  Higher for longer seems to be the expected outcome and a cut in June, which for a while seemed like a certainty, is now in question.  Indeed there was a time when the markets were pricing in a cut for this month, that’s certainly off the table now.  We’ll have to see what Powell has to say. 

 

Until then it’s potentially a day of catching up on some much needed admin, and keeping my head down after a rather lengthy and boozy lunch yesterday.  I have felt better!

 

 

-  08.45 ECBs Lagarde speaks

-  09.30 ECBs Lane speaks

-  12.00 ECBs de Cos speaks

-  13.45 ECBs Schnabel speaks

-  15.00 EU consumer confidence

-  16.45 ECBs Nagel speaks

-  18.00 FOMC rate announcement

-  21.45 NZ GDP

-  23.50 Japan trade

-  00.30 AUS employment

 

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