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  • richard evans

GBP staging comeback vs EUR after testing key support

Good morning

Better than expected US durable goods served to settle the markets down a bit yesterday. At one stage it looked as though USD would push higher, GBPUSD tested 1.2110 and EURUSD to 1.0490. GBPUSD has since worked its way back up to 1.2145, EURUSD just above 1.0500. GBP having the slightly better of it in the crosses, with GBPEUR higher at 1.1555.

USDJPY crept up to 149.70 yesterday evening, now back at 149.30, no sign of intervention as yet and the markets paying little attention to Japan FinMin Suzuki who once again says yen rate is being closely monitored. Some thinking that BoJ would only intervene directly if yen depreciation was too rapid. While we have seen plenty of verbal intervention, we have not seen the next stage which would be the old ‘BoJ checking rates’ news, a more direct warning to the market of the risk of intervention.

The US dollar has held the majority of recent gains, supported by the idea that we will see further rate rises form the Fed. This is fuelled largely by recent comments from some of the more hawkish Fed officials. Kashkari was speaking again yesterday, noting that current policy may not be as restrictive as first thought and rates could rise more than once from current levels. He also notes the neutral rate may have moved up. No surprise really, he is generally hawkish, but the market will latch onto such headlines given the lack of comment from the more dovish members. Mind you, the BoA CEO believes the Fed has won its battle against inflation and the economy is in for a soft landing, although rates will stay high for longer. The USD dollar seems to be ignoring the pending government shutdown so far.

GBPAUD tried to push higher, finally breaking the 1.9075 level to trade up to 1.9130 after the London close. It has since settled back to 1.9050. Aussie retail sales overnight did come out a little lower than expected but AUD does seem to have largely ignored this. Some attention though on AUDNZD which, at 1.0725, is trading at four month lows. This level held in both July and August so a sustained break lower opens up the May lows in the mid-1.05s, while AUD bulls will be hoping for a rebound to the 1.08-1.09 region.

I’m out of the office for the next couple of days. By the time my next report comes around we’ll be out of Q3 and into Q4. That’s come around quickly. By then China will be on their golden week, Spurs will have played Liverpool, Scotland will have played Romania in the rugby world cup and the main event, the Ryder Cup, will be over. USA are current holder, so a draw for them is good enough, while Europe need the win.

Bookies seems as uncertain as I am as to who will win, favouring the USA very slightly to hold the trophy but Europe very slightly to win. Doesn’t make much sense, in the old days I’d spend ages looking for an arb between the prices only to work out that the bookies are actually better at this than I am.

It’s a fairly busy looking calendar today. German inflation numbers could upset EUR if they are weaker than expected. US GDP expected around the 2.1%, while the Fed officials may come across as slightly more dovish but probably not enough to change the market view of further rate rises. I’ve added in Fridays calendar as well, also a pretty full day data-wise. Big question is whether the US avoids the government shutdown, if not it could impact the collection and distribution of economic data, in turn disrupting the Feds decision making process.

- 09.00 ECB economic bulletin

- 10.00 EU consumer confidence

- 13.00 German HICP

- 13.30 US GDP, initial jobless claims, PCE

- 14.00 Feds Goolsbee speaks

- 15.00 US pending home sales

- 18.00 Feds Cook speaks

- 21.00 Feds Powell speaks


- 00.30 Japan Tokyo CPI, unemployment,

- 00.50 Japan retail trade

- 07.00 UK GDP

- 07.00 German retail sales

- 08.55 German unemployment

- 10.00 EU HICP

- 13.30 US personal income/spending, core PCE

- 13.30 CAD GDP

- 14.45 US Chicago PMI, Michigan sentiment survey


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