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  • richard evans

GBP struggles ahead of Fed, BoE rate meetings

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend.

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 27th when we change our clocks in the UK

I apologise that the ‘daily’ report is still a little sporadic and not quite daily, while I continue to recuperate from this shoulder operation. Saw the surgeon yesterday who seemed to be happy with the way things are going and had my first look at the scar I’m left with which I must say is a tad smaller than I’d expected but still pretty decent.

My last reports was back on Thursday 10th. At the time I reported key currency levels as:

GBPUSD 1.3155, EURUSD 1.1035, EURGBP 0.8385 (GBPEUR 1.1925), Gold $2000

EURUSD is remarkably stable, now 1.1000. it is GBP that has lost some ground, GBPUSD currently 1.3020 and EURGBP 0.8445 (GBPEUR 1.1840). Gold too is down, now $1935. There is some talk of slightly better risk sentiment, indeed, EURJPY, a reasonable barometer of risk sentiment, is back up to 129.70 having traded as low as 124.50 a week or so ago. I fear this risk sentiment, stemming from hopes of a breakthrough is peace talks between Ukraine and Russia, is misplaced. I cannot see Russia putting a stop to their invasion any time soon, if anything I am more fearful that they will step up their campaign with more indiscriminate attacks. I also keep the view that for whatever reason they are seeking to draw the West, and NATO, into the fray.

While events in Ukraine rightly dominate the headlines it is easy to overlook other news and economic data. The US Fed will announce their interest rates tomorrow, regular readers will know that since Jan I had been looking for a 50bps rise at this meeting, but given the global uncertainty as a result of the Ukraine invasion I have to say a 25bps rise would now seem more appropriate. This, followed by a strong of other 25bps rises through 2022 is pretty much fully priced so I’m not sure we should see a significant move in USD as a result. A 50bps would likely push USD higher.

Thursday sees BoE offer their latest rate announcement and a 25bps rise to 0.75% is widely expected. GBP is certainly struggling to get any support from that for the time being.

Finally, it is a trade day for our currency purchase programs. Having seen GBPUSD fall quite heavily in recent weeks, USD buyers would normally balk at executing a transaction at these levels. We on the other hand have no such qualms, firstly because we are only adding small amounts into our positions, with many having been struck at higher levels, and secondly because we take comfort in the knowledge that our initial entry levels will improve should we see GBPUSD push higher again in the coming months.

One other piece of news. My U15 team were beaten 2-0 in the League Cup quarter final at the weekend. Disappointing, particularly as we conceded the first goal within thirty seconds of kick-off, but our opponents were a strong division one team and overall it was a fair result. It does mean we can focus on our league fixtures, still 15 matches to play and not enough Sundays to play them before the end of the season. Midweek matches and double-headers are being proposed…….

I’d better stop there otherwise it won’t really be a morning report!

- 10.00 EU industrial production

- 10.00 German ZEW

- 12.15 CAD housing starts

- 12.30 US PPI

- 15.15 ECBs Lagarde speaks

- 23.50 Japan trade balance

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