GBP loses ground as Starmer faces resignation calls

Good morning

A bit of a nothing day yesterday, not much news to get our teeth into although once again the equity markets shrugged off the lack of an Iran peace deal and closed mostly in the black.  The US dollar was on the retreat with GBPUSD and EURUSD up a few pips, GBP having the better of it with GBPEUR at 1.1585, 20 pips or so higher than Friday’s close.  Since the London close though we’ve seen a change in GBP sentiment.  Having seen a high around 1.3650 yesterday, GBP dropped through the evening and overnight, currently 1.3540 as I type. 

A small part of this move could be blamed on Trump who has put a dent in risk sentiment by saying the Iran ceasefire is on ‘life support’, sending equities lower and oil and the US dollar higher, but EURUSD has been less affected, losing just around 40 pips or so compared to GBP’s 100+.  GBPEUR has come lower mas a result now 1.1525.  Overnight UK BRC retail sales data was far worse than expected but we’ve seen a spike higher to recent highs in UK bond yields this morning and I’m wondering if the pressure on UK PM Starmer to resign is starting to impact the markets.

USDJPY climbed to the 157.80 area this morning only to be sold off to the 156.80 area.  That move was brief, we are now back to 157.50 and I’m wondering whether it is worth looking at short dated downside USDJPY options.  Of course, they are not quite as cheap as we’d want, I’d hoped to see a one week 157.00-157.50 strike for 50 yen pips it would give us low risk and plenty to trade spot against on dips, but they are priced a bit higher than that.  Selling spot in the high-157s is an alternative but is a riskier move and hugely reliant on BoJ intervention.  Decent risk reward perhaps though.

I mentioned Hanatavirus yesterday, not that I am overly concerned mind you but it’s in the headlines and not going away.  I read that passengers from the affected cruise ship are in hospital in quarantine for a few days, then then self-isolate at home for a further six weeks as it can take that long for symptoms to show.  Given the long incubation period, the WHO say it is likely we will see further cases in the coming weeks.  My main worry is that I thought some passengers had disembarked the cruise ship a while ago and they are still roaming around free as far as I’m aware.  Watch this space!

Starmer was speaking, he made it abundantly clear he has no intention of stepping down, but I’m not sure his cabinet or his party are still offering him any support.  Quite what he will choose to do, or be forced to do, is unclear and to be honest there isn’t a great line up of people to take his place should he step down.  While Starmer continues to fight for his role as PM, Zak Polanski, head of the Greens, could have already knocked any outside chance he had to be seen as a serious politician.  He has made the absurd mistake of not paying his council tax.  Seriously, the idiocy of these people in the public eye who think they can get away without paying for things that everyday people have to, those very people he claims to want to help.  He’s certainly not the first, and won’t be the last, but I just fail to understand how people under so much scrutiny still flout the most basic of laws.

Now, of course I have to mention Spurs who scraped a draw against a Leeds side who certainly weren’t firing on all cylinders last night.  It was a match that summed up a lot of Spurs season.  Some good football at times, some interesting refereeing and VAR decisions for both teams, missed goal opportunities and individual errors that affected the outcome of the match.  I’d probably have taken a point before the match but the two dropped points keeps Spurs in a very vulnerable position.  Just two matches to go.

Unless we get anything new from Starmer or Iran, today’s main event should be US CPI inflation.  Headline is expected to rise from 3.3% to 3.7%m while core CPI may tick a little higher from 2.6 to 2.7%.  RBNZ inflation expectations due overnight.  GBPNZD is currently at 2.2775, not far off the lowest level for two months, I’d like to look at overnight calls or perhaps one week strangles as I can’t see it holding around these levels. 

Have a great day…

-  10.00 German ZEW

-  11.40 ECBs Elderson speaks

-  13.15 US ADP 4 week average

-  13.30 US CPI

-  18.00 Feds Goolsbee speaks

-  19.00 US monthly budget statement

-  02.30 AUS wage price index

-  04.00 RBNZ inflation expectations