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  • richard evans

GBP remains firm, tests high vs EUR

Good morning

In a bit of a repeat of last months release, the headline nonfarm payroll number disappointed but the average hourly earnings and unemployment rate were both better than expected on Friday. We didn’t see a huge impact on the currency markets, the data was strong enough to keep the idea of earlier Fed rate rises on track. US 10 year yield ticks above 1.8% for the first since the pandemic began but this is not leading to renewed dollar strength. Us inflation numbers due this Wednesday, likely to be the highlight although we will also hear from several Fed officials this week, including Powell.

UKs new Brexit negotiator Truss said she would like to see a an agreement made with EU but is willing to trigger Article 16 if necessary. GBP not affected by her comments, GBPUSD just 20 pips off recent highs at 1.3580, while GBP is testing the key 1.20 area once again against EUR, so far unable to break that psychological number. EURUSD meanwhile holding pretty steady at 1.1325.

In Covid news we continue to see large numbers of new daily cases although there is some suggestion that we may have seen the peak. I am surprised that more children were not found to be positive when tested on their return to school, perhaps a sign that things may not be as bad as first feared. Mind you, a shortage of lateral flow tests could well be responsible for lower confirmed cases, but as I said last week perhaps we should be looking at hospitalisations rather than case numbers. . Talking of testing, I see China is planning on testing all 14 million citizens in Tianjin city after a couple of Covid cases were found. There is a lot of commuting between Tianjin and Beijing and with the winter olympics looming, authorities will be trying to contain the virus as bet it can. Not sure this zero policy works, I wonder if we will see some change of policy in late Feb after the end of the Olympics.

Putin continues to mass troops on Ukraines border and continues to make demands, quite an interesting method of getting the attention of the likes of US and EU. I cannot see US bowing to pressure from Russia, while Russia are unlikely to withdraw troops until they have the answers they are looking for. A bit of a stand-off for now, talks due to take place this week but there doesn’t seem much optimism that we’ll get a breakthrough. Meanwhile Russian troops are now on the ground in Kazakhstan. Putin is spreading his wings and its worrying.

Onto weekend sport. Spurs managed to overcome the mighty Morecambe yesterday, but Arsenal lost out to Nottingham Forest, not the biggest upset of the rounds but one of the more high profile clubs to bow out. England managed to narrowly avoid defeat in the fourth Ashes test match but still failed to look anything of a match for Australia. I’m afraid you’ll have to wait another week for the news you’re really waiting for, as our county cup match was postponed due to a waterlogged pitch. The fixture should be played next Sunday instead. Disappointing, but I did hastily arrange a friendly with a team who have historically been stronger than us and are currently top of the division above us. It was good preparation for the cup match and more pleasing that we beat them 4-2. They weren’t impressed.

Finally, I see Djokovic has won his court case to stay in Australia, seemingly on the grounds that he had Covid in mid-December, confirmed by a PCR test on 16th Dec. I understand he was seen maskless at a public event on 17th Dec so if he did indeed have Covid it looks as though he knowingly disregarded rules over isolation. None of it looks good but for now he may indeed get to play the Aussie Open although I’m just seeing reports that he has been taken into custody again. Watch this space.

- 10.00 EU unemployment rate

- 15.00 US wholesale inventories

- 00.01 UK BRC retail sales

- 00.30 AUS retail sales, trade balance

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