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  • richard evans

GBP weakness continues

Good morning

The feeling that various central bank rates may be at or near their peak seems to be gaining traction. ECBs Stournas ha said that a rise next week of 25bps could well be enough while forecasts are pretty evenly mixed for no change or a further rate rise in September. FTSE 100 had a strong day yesterday, closing up nearly 2% on hopes inflation will continue to slow and perhaps further rate rises will be limited.

GBP has continued to lose a bit of ground, currently 1.2920 against USD and down at 1.1520 against EUR, also lower against the likes of AUD, NZD and CAD at 1.8930, 2.0560 and 1.6980 respectively. AUD made gains on stronger than expected employment data overnight. UK retail sales numbers will be released early tomorrow morning, not expected to be particularly pleasant.

One central bank struggling with this is CBRT in Turkey, you may remember last month they raised rates 6.5% and it is expected they will follow this with a further 5% rise, taking rates to 20%. CBRT are still unwinding Erdogans odd policy of lowering interest rates to lower inflation. USDTRY is trading up at almost 27.00, EURTRY at 30.21 and GBPTRY around 35.00. Does make a holiday in Turkey cheaper.

South Africas SARB will also be announcing rates today, feelings are mixed over this, whether we see no change or a 25bps rise to take rates to 8.5%. A small rise had been expected but with ZAR appreciating in recent days there is perhaps a chance they will choose to keep rates on hold this time round.

Chinas PBOC set USDCNY fix at 7.1466, considerably lower than market expectations which had been looking for a number around 7.2200. This sent a strong message to the markets that they are serious about curtailing CNY depreciation. They kept interest rates on hold but made some policy tweaks to cross border funding which should ultimately enable more foreign capital inflows. US/China climate talks ended with Kerry calling the talks ‘productive’ and claiming that more meetings will follow.

Global wheat prices rallied sharply yesterday as Russia warned any ships heading to Ukraine ports would be considered as potential military targets, coming after Russia pulled out of the Black Sea grain agreement.

In the Ashes, Australia finished on 299-8, a decent recovery after having been 189-5 earlier in the day. England will be hoping to take a couple of quick wickets and to start batting as they try to level the series. Elsewhere, the womens football world cup is under way with co-hosts NZ currently taking on Norway in the opening game. England, second favourites for the tournament behind USA play Haiti on Saturday.

- 12.00 CBRT rate announcement

- 13.30 US initial jobless claims, philly fed survey

- 14.00 SARB rate announcement

- 15.00 US existing home sales

- 15.00 EU consumer confidence

- 00.01 UK GfK consumer confidence

- 00.30 Japan CPI

- 07.00 UK retail sales

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