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GBP remains under pressure while FTSE hits record highs

Good morning


Happy St George’s Day to you all


GBP slipped lower yesterday, GBPUSD hit a low of 1.2300 while GBPEUR traded to 1.1570.  Both are now a little off those lows, GBPUSD is 1.2340 while GBPEUR is trading just a few pips below 1.1600, unable so far to get back above that level.  The GBP weakness is, as I mentioned yesterday, mostly down to recent talk from BoE officials pointing to the possibility of earlier rate cuts.  We hear from BoEs Haskel and Pill today, both of whom err on the dovish side.


The UKs FTSE 100 closed yesterday at record highs (8,023.87), boosted by rate cut thoughts.  What I find strange then is that UK banks have raised mortgage rates, saying they think BoE will not cut rates as early, or as often, as originally expected.  The increases are not great but just seem to be moving in the opposite direction.


EURUSD sits at 1.0645 having traded in a fairly tight 1.0665-1.0625 range yesterday, unmoved by ECBs dovish official Centeno who said total rate cuts this year by ECB could be in excess of 1%. A reuters poll suggested three rate cuts this year, each of 25bps starting in June.  Lagarde spoke yesterday but said nothing on rates.  ECBs de Guindos suggested ECB action will be partially determined by the Fed, need to be careful what happens after June, must take note of FX movements and                            what happens in the US.  If a June cut by ECB leads to EUR weakness, and with no change from the Fed, further ECB cuts could be limited.


USDJPY trades at 154.75, so far unmoved by Ueda who again has said he could look at rate increases, and Japan FinMin Suzuki who has said the groundwork for intervention has been laid after last weeks discussions between South Korea, US and Japan.  We do have the BoJ rate announcement later this week but I have seen no reports looking for a rate rise this time.  GBPJPY trades at 191.00.


Gold was sold off aggressively overnight.  Having traded to $2,420 on Friday, it slipped to $2,330 into the evening and then dipped to $2,295 in the early hours of this morning.  Attempts of a recovery were brief, it now sits at $2,305.


As the US passes its Ukraine aid package, Russia warns we are on the brink of a direct military clash between nuclear powers.  I presume he means the West and Russia, but could of course be referring to China, if they were to invade Taiwan, or perhaps North Korea who have been stepping up their missile tests recently. 


In other news, I see Thames Water are looking to raise bills 44%.  They are not the only one, Southern Water recently proposed a 66% price rise in order to pay for much needed investment in infrastructure, having paid billions to shareholders.  Ah, don’t get me started.  Actually, while I’m sounding like a grumpy old man, I might as well mention my annoyance at the news of a train strike over the May bank holidays.  What on earth can train drivers want now? 


The UKs Rwanda bill has finally been passed by Parliament and I believe now needs royal consent to become law.  There are still legal challenges that could hold up the scheme but Sunak is confident the first flights will leave within 10-12 weeks.  The idea is that those seeking asylum and have travelled here from another safe country to seek the UKs protection, will be flown to Rwanda and dealt with there.  Whether this actually deters people from crossing the Channel in small boats remains to be seen, the BBC report just this morning they witnessed a small dinghy with 67 people on board setting off from France.  The BBC also report there are some 52,000 people in the group potentially sent to Rwanda for processing.


There is a great deal of opposition to the scheme, although I for one think it is has merits.  I fail to understand why someone who has fled their own country and arrives let’s say in France, a safe Western country, has the need or desire to make any further travel.  Surely they are safe from persecution there.  Now, we don’t want this law being abused, we know there are people who legitimately need our help, but not everyone arriving on our shores does so because they are in imminent danger.  I am well aware that my thoughts are not shared by all, but action is necessary.  Don’t be cross with me for my thoughts, I’ll happily have a sensible discussion with anyone about the plan and am open to hearing both sides.


Enough of that.  Mark will be happy to today as Leeds beat Middlesbrough last night to get back into the automatic promotion places. Team around them have a game in hand but at this stage it is important to have the points in the bag.  With just two or three matches to be played, it will be an exciting end to the Championship.  Indeed we are set to have a great deal of football to enjoy, with the Premier league title well and truly up for grabs, and the Champions league even though no English teams are still involved.  Then of course we will have the Euro 2024 tournament which kicks off in mid-June.  Fantastic.


PMIs will be in focus today, particularly those from the US which, if strong, could support the idea that Fed rate cuts are off the table for some time.   We’ll have the BoEs Haskel and Pill speaking, there will also be several ECB officials speaking through the day.  There are no Fed officials on the calendar as we are in their blackout period ahead of their next rate meeting.


Have a great day


-  09.00 EU manufacturing, services PMIs

-  09.00 BoEs Haskel speaks

-  09.30 UK S&P manufacturing, services PMIs

-  12.15 BoEs Pill speaks

-  14.45 US S&P manufacturing, services PMIs

-  15.00 US new home sales

-  23.45 NZ trade balance

-  02.30 AUS CPI


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