Good morning
The US dollar resumed its march higher yesterday with GBP, EUR and JPY all weakening against for now, the unstoppable dollar. GBPUSD traded down to 1.2105, EURUSD to 1.0435 and USDJPY up to 137.00 marking yet another new high in this cycle. USD has lost a little ground since then, USDJPY is at 136.15, GBPUSD a little higher at 1.2150 although EURUSD is still near those lows after Lagarde yesterday affirmed her commitment to a 25bps rate rise in July rather than 50bps. This helped GBP push a little higher against EUR to 0.8590 (GBPEUR 1.1640).
Powell was relatively optimistic on the US economy, while BoEs Bailey warned that he expects a further increase in inflation. New BoE member Dhingra has sounded dovish, saying new data shows a slowdown is more imminent. Meanwhile UK data out this morning was very much in line with expectations, GBP q/q at 0.8% with y/y 8.7%. EUs Sefcovic warns UK that EU will cancel deals on food, banking and data sharing if UK try to change NI protocol. He does say EU are still open to talks but cannot agree on any hard border in Ireland.
An interesting point made by HSBC yesterday that while there hasn’t been much in the way of fundamental changes in the past couple of weeks, most of their fundamental indicators have gone from bad to worse. They are concerned that the risk of recession is well under-priced and are reducing their holdings of risk assets.
Also interesting to see that CITI took profit just below parity on a short EURCHF position that they had initiated in the mid 1.01’s, at almost exactly the same time and rate that a reasonable French bank went short EURCHF looking for a leg lower to 0.09600. I really feel frustrated that I’d not really looked more at downside EURCHF once SNB lifted rates 50bps a couple of weeks ago. Hindsight is a wonderful thing, I know.
Russia don’t like the idea of Finland and Sweden joining NATO, Putin warns Russia would respond if NATO set up infrastructure there. Tensions are rising. I’m sure Russia are also very unhappy with Turkey for dropping their veto which allowed Finland and Sweden in the door.
Finally, I note that Heinz have stopped supplying Tesco with some of our favourite products such as baked beans, ketchup and tomato soup in a row over pricing. Heinz have said production costs are rising, Tesco have said they are not willing to pass unjustifiable price increases onto their customers. It is highly likely the dispute will be resolved at some point soon but I don’t think this will be the last we see of such disagreements. Difficult to know who is right. Tesco of course look like the good guys, fighting for lower prices for the customer, but we also know they have a habit of using their clout to beat down suppliers unreasonably.
- 08.55 German unemployment
- 10.00 EU unemployment
- 13.30 US personal income/spending, PCE, initial jobless claims
- 13.30 CAD GDP
- 23.45 NZ building permits
- 00.30 Japan unemployment, Tokyo CPI
- 00.50 Japan tankan manufacturing index
- 02.45 China caixin manufacturing PMI