Good morning
It was a pretty quiet day on the currency markets yesterday. GBP did come within a pip or two of 1.3400 vs USD, couldn’t quite break through but stayed well supported, trading around 1.3380 into the London close. EURUSD made some gains, reaching 1.1160 through the afternoon, which took GBPEUR just off its highs but holding around the 1.2000 area. A pretty shocking consumer confidence number out of the US in the afternoon did nothing to help USD fortunes.
Overnight we’ve seen a bit of a change. GBPUSD had traded up to 1.3430 at one point but is back to 1.3395 as I type, but it is EUR this time that has seen the bigger move, EURUSD is just a few points away from 1.1200 and GBPEUR is back down to 1.1965. Quite why EUR has had this latest little push isn’t quite clear. ECBs Nagel had commented that the German economy will slowly pick up some momentum, but that is hardly enough to impact the markets. Perhaps there were plenty of people who took my comment on board yesterday that 1.2000 is perhaps the right level for EUR buyers to cover some of their forward requirements.
BoEs Bailey has warned not to expect a rapid reduction in interest rates even though he is encouraged by lower inflation readings. He has made it clear we should not expect to see near-zero rates, ECBs Knot made similar comments about ECB rates, saying he sees ‘normal’ rates starting with a 2. He sees gradual rate cuts in the coming months and early 2025.
Overnight, Aussie monthly CPI dipped to 2.7%, slightly lower than expected and back within RBA’s target band of 2-3%, which saw AUD sold off. Do remember RBA’s Bullock did earlier make it clear that just because inflation may drift back into the band it does not mean it can sustainably hold those levels. However this hasn’t stopped players seeing slightly increased chances of a cut later this year.
Not much on the calendar today but tomorrow could be more interesting with US GDP and several Fed speakers including Powell and Lagarde, while Friday we’ll have the latest PCR deflator number from the US.
I’m out and about a bit this afternoon, normally one of my favourite pastimes although I’m looking out of the window now at some rather heavy rain once again. That difficult conundrum of which coat to take without getting too hot but still staying dry. Still at some point I’ll be in the confines of a nice restaurant in London with a nice glass of red, so perhaps I shouldn’t complain too much.
Have a great day
- 09.00 BoEs Greene speaks
- 15.00 US new home sales
- 21.00 Feds Kugler speaks
- 00.50 BoJ minutes
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