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GBP slips ahead of tomorrow's BoE rate announcment

Good morning

 

Well it was a pretty quiet day yesterday.  GBP lost a little ground against USD and EUR, GBPUSD moving to 1.2530 and GBPEUR to 1.1635 through the day.  Perhaps the notion that tomorrows BoE rate announcement could come across as more dovish is to blame.  Some suggestion BoE may lower its inflation forecasts and potentially see at least one of the more dovish members vote for a rate cut, while the hawkish members are likely to express a desire to keep rates unchanged this time around. 

 

Overnight, a bid in USDJPY took that pair from 154.50 to 155.25, the USD buying spilled over to other currencies, GBPUSD slipped back further to 1.2485, EURUSD was also dragged lower to around 1.0740.  Both are currently just a few pips from their lows as I type, GBPEUR too is now a few pips off its 1.1620 lows.   BoJs Ueda was speaking, once again making the point that while monetary policy is not used to control currency levels, if a weak Yen is deemed to be contributing to inflation, they would have to raise rates.

 

Gold prices have been rather steady, now $2,315, as it is reported that PBoC continued to purchase gold through April, albeit at a slower pace.  They bought some 60,000oz, approximately $140m worth, down on the 550,000oz they bought through Feb and March.  Perhaps the high prices slowed their appetite for buying the precious metal.

 

Oil prices are at eight week lows despite the ongoing conflict in the Middle East.  The ceasefire negotiations between Hamas and Israel are ongoing but still facing major difficulties.  I read one report that suggested Hamas had offered its own solution, and then communicated to the world that it had agreed to abide by that solution.  Well, that’s never going to work.  Israel want to ensure supply routes to Hamas, which it says are from tunnels in Rafah, are permanently closed and are likely to widen their attacks on the area.  settle for any Hamas demands they deem unreasonable.  Peace still seems a long way off.

 

Any sign of agreement between the rail unions and the government also seem to be unlikely.  Commuters are faced with more strikes this week, while drivers seek more pay.  I don’t know any train drivers so I can only go by what I read in the papers.  They tell me the average driver gets just short of £60,000 and the pay rise Aslef have turned down would have seen that rise to £65,000.  I don’t know what working conditions are like, probably quite lonely, but I don’t think they are on bad money.

 

Still, any striking rail workers looking to fly away for a couple of days holiday would have been disappointed after huge disruption and delays were seen at airports as passport E-gates failed.  They are now back up and running.  The Home Office have said there is no evidence of a cyber-attack although I must admit when I see large-scale technical issues such as these, that is exactly the first thing that springs to mind.

 

In sports, congratulations to Borussia Dortmund for beating PSG to reach the Champions League final.  Bayern Munich will be hoping to make it an all-German final as they take on Real Madrid this evening in the second semi-final.  The first leg ended 2-2 so both teams have everything to play for. 

 

This morning we’ve had the Swedish Riksbank rate announcement.  They lowered rates 25bps as expected to 3.75%, SEK has weakened a little but the cut was largely priced in already.  Otherwise it’s an empty economic calendar today, but we’ll hear from some Fed officials this afternoon.  Aussie retail sales numbers are due overnight, as is the latest China trade balance which is expected to come in around +US$77bn, up from last month’s number of ‘just’ $58.5bn. 

 

Enjoy the sunshine….

 

 

08.30 Riksbank rate announcement

16.00 Feds Jefferson speaks

16.45 Feds Collins speaks

18.30 Feds Cook speaks

02.30 AUS retail sales

04.00 China trade balance

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