Good morning
Not a vast amount of movement in the currency markets to report from yesterday. GBPUSD had traded down to around 1.2535, EURUSD to 1.0695 but both ticked a little higher overnight, a weaker USD after comments from Fed officials seemed responsible for the move. Powell said the US inflation data was in line with Fed expectations and Goolsbee warned against getting too hung up on one release. EURUSD reached 1.0735 and GBPUSD just managing to reclaim 1.2600.
Softer UK GDP figures out early this morning sent GBPUSD back towards yesterdays lows, but has so far held around the 1.2550 area. With EURUSD unmoved, GBPEUR is lower, now 1.1690, although as with GBPUSD there are signs the move has run out of steam. GDP came in at -0.3% (expected -0.1%) means we have now seen two quarters of negative growth which by some measures puts us in a recession. BoEs Bailey had warned a couple of days ago about a possible shallow recession, he hinted it could be short-lived but for now we’re not looking great.
We’ll be hearing from BOEs Greene and Mann today. Greene had previously voted for a rate rise but chose to keep rates on hold at the latest meeting, Mann had again voted for a rate rise but has since said it was a close call. After the softer inflation print and todays GDP data I would not be surprised to hear more dovish noises from Mann.
UK are not the only ones struggling. The German economy minister has said the German economy is ‘dramatically bad’, and there is talk their 2025 GDP forecast will be cut from 1.5% announced in October to just 1%. Meanwhile S&P have cut ratings of the German bank PBB over concerns of their exposure to commercial real estate. There is surely more bad news to come from ‘CRE’. ECB rate cuts required perhaps, but a typically hawkish ECBs Nagel has warned against the risk of cutting rates too early.
Japan is also in recession according to numbers released overnight. USDJPY is off those recent highs but still holding just above 150.00, it is possible this data could push back timings of a move away from negative rates, indeed market pricing of a rise in April is coming in lower but still around 65%, down from around 75%.
With the Ukraine war, the Middle East crisis, North Korea’s missile testing and China keeping a close eye on Taiwan, the world could really do without any more conflict. However the US are reporting that Russia are planning to put nuclear weapons into space, a move they would regard as a grave threat to vital US satellites. War in space? Should make a film about that.
In sport, England are currently taking on India in the third test. England took early wickets to leave India on 33-3 but a decent batting spell has seen a recovery to 185-3.
Finally, London’s tube map is facing something of an upgrade as six overground lines have been renamed and given new colours to bring them more into the TfL fold. The lines have been given the names Lioness, Mildmay, Windrush, Weaver, Suffragette and Liberty, all following historical events in the areas the lines serve. The changes will start immediately but the full rebrand won’t be rolled out until August. Some see this as making travel a bit easier, for me it is a sign of London’s expansion over the years.
Plenty of US data on offer today, along with various central bank speakers. Early tomorrow morning we’ll see UK retail sales, these looked terrible last month and are not expected to look much better this time around.
- 12.00 ECBs Lane speaks
- 13.00 BoEs Greene speaks
- 13.30 US retail sales, philly fed survey, initial jobless claims
- 13.50 BoEs Mann speaks
- 14.15 US industrial production
- 18.00 ECB’s Nagel speaks
- 18.15 Feds Waller speaks
- 21.30 NZ business PMI
- 07.00 UK retail sales
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