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  • richard evans

GBP remains strong, markets await US CPI

Good morning

GBP remains one of the better performing currencies, currently 1.2630 against USD and 1.1510 against EUR. In some crosses we are seeing GBP making and holding gains, GBPZAR now up at 23.70, GBPJPY 171.00, although GBO is struggling to make ground against AUD and NZD, those now 1.8650 and 1.9900, a fair way from recent highs.

Quite where GBP is getting this boost from I’m not sure. OK, so we are looking for a 25bps rise to 4.5% at tomorrows BoE rate meeting but this is fully priced in. We may indeed see more rate rises, remember there are some people thinking we’ll see rates up to 5% soon, but ECB officials are, if anything, sounding more hawkish but this isn’t at all reflected in the EUR which is now 1.0960 against USD. It’s quite a change from September last year when the UK economy looked as though it was going to implode.

US inflation numbers are released today. You may recall back in February I mentioned a little-known piece of data called the Adobe Digital Price Index which some said had a decent correlation with CPI. This came out softer than expected which is leading some to look for a lower headline reading today. US Dollar has been under pressure recently and if that CPI does indeed come out weaker we could see more USD selling as it could give Fed scope to cut rates later in the year. Meanwhile the threat of a US default continues, Moody’s say there is 10% chance of a short-term breach but if we look at comments from Biden and the Republicans, neither of whom seem willing to give an inch, I think that percentage could be higher.

Russia celebrated its Victory Day yesterday although some events were scaled down over security concerns but it all seemed to pass peacefully. Ironic really when you consider the invasion of Ukraine that has cost so many lives on both sides, all for something quite frankly that doesn’t seem to make much sense. The recent evacuation of towns near Zaporizhzhia, home of Ukraine’s nuclear plant, reminds us of the potential for an imminent disaster. Peace still looks a long way off unfortunately.

- 13.30 US CPI

- 19.00 US monthly budget statement

- 00.50 Japan current account

- 02.00 AUS consumer inflation expectation

- 02.30 China CPI

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