• richard evans

GBP the main loser yesterday

Good morning

A big day yesterday, certainly one of the biggest in FX for some time and GBP was a key loser. GBPUSD traded sharply lower, from 1.3720 down to around 1.3520 through the day and as I type this weakness looks like it may continue as the pair traded to almost 1.3500, but managed to recover to 1.3535, for now! There has been a lot of talk this is led by US dollar strength due to higher yields, and I’m sure this is part of the answer. However US 10 year yields hold around 1.5%, and Powell has made clear again that although tapering may begin, rate rises are a long way off. GBP is not only lower against USD but also EUR, with EURGBP up to 0.8635 (GBPEUR 1.1580), this time yesterday we were at 0.8530 (1.1725).

Quite what has driven GBP so low is not clear. BoEs newest member, Mann wasn’t overly dovish, following the usual ‘inflation is transitory’ line. The ongoing saga with energy prices and fuel supplies isn’t helping, I actually thought the fuel shortage would be something of a blip and just come and go, however UK PM Johnson has warned it could continue for another month. Typical, just as my lawnmower starts working again.

Global equities are having a fairly torrid time, with many global indices down around 2% yesterday and overnight. The ongoing Evergrande saga is not helping, reports that Fed having been asking US banks about their potential exposure to the firm. Worries about the US debt ceiling don’t help either, Yellen has said the ceiling would likely be hit by 18th October, a bit earlier than expected, meaning there isn’t a great deal of time to reach an agreement to raise it.

Plenty of talk over whether Feds Powell will continue as Fed Chairman for a second term, comments from Senator Warren won’t help his cause as she labelled him a dangerous man over his stance on financial regulation. Not exactly a glowing reference.

New Zealand has seen a spike in Covid cases, numbers are still low but the increase from single digits to 45 was enough to send NZD lower, AUDNZD trading from below 1.0400 to 1.0430

I mentioned the US test of a hypersonic missile yesterday, well North Korea say they too have tested such a weapon. Who knows whether they have, but missile testing has been very active recently in a show of force and there is growing concern they will soon be able to produce nuclear weapons. Worrying.

Not all technological advances have to be in the military, some are far more friendly. I see Amazon are launching a home robot, pretty much a moving Alexa/Echo with a big screen and a camera on a periscope. It can be programmed to patrol a house and will alert the owner if it ‘sees’ anything unusual, it can also be controlled remotely by the owner to move around the house, to check if a hob has been left on, for example. No one needs it of course but then again no one really needed an Alexa device and many households have one now. However it’ll take a while to reach the UK so don’t add it to your Christmas list just yet.

- 09.00 Swiss ZEW

- 09.30 UK mortgage approvals

- 10.00 EU confidence data

- 13.00 ECBs de Guindos speaks

- 14.00 SNB quarterly bulletin

- 15.00 US pending home sales

- 15.30 ECBs Lane speaks

- 16.45 Feds Powell, ECBs Lagarde, BoEs Bailey speak

- 00.50 Japan industrial production

- 02.00 China manufacturing, non-manufacturing PMIs

- 07.00 UK GDP

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