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GBPEUR testing that 1.1770 area

Good morning

 

US consumer confidence yesterday lifted to 102 from an expected 96, serving as a reminder that many areas of the US economy are still enjoying some good times despite rates being stuck at high levels  Several Fed officials were speaking, the most notable was Kashkari who said he still wants to see many more months of data before agreeing to a rate cut, and sees certainly no more than two possible rate cuts this year.  He mentioned some softening in the job markets but that wage growth remains robust.  He also mentioned that rate rises were not off the table just yet. 

 

All this helped to reign in the USD weakness that we’ve seen over the past few days.  Not turn it around, but at least slow it down.  GBPUSD had touched 1.2800 but slipped to 1.2750, now 1.2765, while EURUSD which had been 1.0890 fell back to the 1.0845 area, now 1.0855.  GBPEUR traded once again to 1.1770, failing to break higher as it has done every time it has tested that levels since Sept 2022.  It is definitely still worth watching that 1.1770 area. 

 

In the Eurozone, Macron and Scholz have agreed to work on deeper ties in EU’s capital markets, aimed at boosting investment in the EU itself.  I’m presuming this means EUR denominated bonds guaranteed by the bigger countries in the bloc, something that I know was frowned upon a few years ago.  No reaction in the currency markets.

 

USDJPY pushed a little higher, helped in part by the mildly stronger USD but more a continuation of a weak yen theme that has been in place since the ‘intervention’ in late April/early May.  USDJPY reached 157.40 overnight, it is off those highs now at 157.00, a sharp move from 157.20 to 156.90 around the London open showed how nervous the market still is.  GBPJPY hit a high overnight of 200.75 before dipping to 200.10 this morning, now 200.50.

 

 Aussie monthly inflation overnight was higher than expected at 3.6%, also higher than last month’s reading.  This initially pushed AUD higher, with GBPAUD trading from 1.9205 to 1.9135, but the realisation that this level is still within RBA’s forecasts soon softened the blow and GBPAUD regained some of those losses, now 1.9180.

 

South African elections take place today, voting stations close 19.00 London time and counting will begin soon after then.  Impact on ZAR will depend on ANC holding their majority, or at least getting enough votes to form a friendly coalition.  GBPZAR around 23.30 as I type.

 

German inflation is the highlight for today, coming ahead of the EU version on Friday.  German numbers are expected to show a slight rise from 2.4% to 2.7%, EU numbers are also expected to see a small uptick.  Otherwise there is little else on the calendar, it starts getting more interesting tomorrow with US GDP and then Friday sees that EU inflation and US core PCE.

 

I managed another round of gold yesterday, good practice ahead of my long-awaited golf weekend.  It served as a reminder that I am quite capable of hitting a decent ball and scoring quite well, I am equally capable of looking as though I’ve never picked up a club before.  I could blame the shoulder replacement, and/or the fact the other shoulder needs replacing, however it is clear I struggle more towards the end of the round which can only be put down to fitness, or lack of it to be more precise.  That doesn’t bode well for 3 ½ rounds in three days. 

 

I’ve got a family holiday in June and then go away again later in August, the latter of which will have a fair bit of walking around various European cities.  Between the two I’m going to have to do something to get a bit fitter.  Knowing my luck the weather will be fantastic and all I’ll want to do is have a bbq with a couple of beers.  I reckon I could find any excuse to put off my health kick. 

 

Mind you, I’d been worried about the round yesterday as rain had been forecast all day.  As it was, we stayed dry the entire round.  Just don’t know whether to believe these forecasts!

 

Have a great day

 

-  13.00 German HICP, CPI

-  18.45 Feds Williams speaks

-  19.00 Feds Beige Book

-  23.45 NZ building permits

-  00.00 Feds Bostic speaks

-  03.00 NZ budget

 

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