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Hawkish Fed comments, better UK retail sales

Good morning

Feds Williams warns that there are some broader based increases in inflation over the longer term, adding he would not like to see them move significantly higher. Even Feds Evans, usually quite dovish, says Fed could adjust economic forecasts and sees a possible rate rise after tapering ends in 2022. A recent Reuters poll does now see a rate rise in Q4 next year, brought forward from previous forecasts of Q1 2023. We should know over the weekend whether Biden supports Powell or Brainard for the Fed chair post.

GBP holding up quite well after UK retail sales numbers this morning showed a larger than expected monthly rise. Sales are still lower than this time last year but perhaps this better than expected reading suggests things could be picking up just in time for Christmas. Speaking of which, Amazons Black Friday week begins today. Time to spend hours looking through pages of things that we don’t really need just because they are a few pounds cheaper. They do always seem to do a good deal on Alexa/Echo devices mind you.

GBP initially crept up a few pips to get back over 1.3500 but that didn’t last long and we are back at 1.3480 as I type, while GBP is a little higher against EUR, EURGBP now 0.8405 (GBPEUR 1.1900) having spent much of the night nearer 0.8420 (1.1880). Not really much to be excited about although I see a Telegraph article suggests EU/UK could find a compromise in the NI protocol of EU judges. UK do not want ECJ to have final say over disputes, EU may relent a little on this which wold help things a lot. There certainly seems to have been more positive headlines regarding EU/UK discussions recently.

CBRT cut rates 1% to 15%. USDTRY seemed to settle on the news before the pair jumped aggressively to hit almost 11.28, EURTRY reaching 12.83. Both a little off those highs now at 10.95 and 12.40 respectively, but it’s not looking good. Almost exactly one year ago I reminded readers that in 2015 I had been trying to find a hedge for upside EURTRY to protect against a possible move above 3.00. Just two years ago EURTRY was at 6.50 or so, pretty much half current levels. Imagine the mayhem if GBPUSD was trading down at 0.7000. It really cannot be very comfortable.

In Covid news, infection rates certainly seem to be on the rise in schools. As you know my eldest son is having to test daily before school due to high number of cases, I am hearing of some year groups in other schools having been sent home to try to stop an outbreak and many managers from the football teams we play against are saying it is getting harder to field a team due to Covid cases. I am still hopeful that vaccines and boosters reduce serious illness and hospitalisations. Germany follows a few other EU countries with restrictions for unvaccinated people

Canada retail sales due this afternoon, perhaps overshadowed by news of floods and mudslides, British Columbia declaring a state of emergency earlier in the week. Also, for those who think our supply chain issues are Brexit related, I see US, Canada and Mexico have met to discuss the need to alleviate supply chain issues over there.

Finally, I popped my head out of the window this morning to see if I could spot the partial lunar eclipse and have to say I was a tad disappointed that I couldn’t see anything. Not sure if it was due to clouds or my location, which is in a bit of a valley and as such I don’t get a splendid view of the horizon. Ah well, October 2022 we may well be treated to a partial solar eclipse. That’s more like it. Now, back to Amazon. They still accept Visa…for now…..

- 08.30 ECBs Lagarde speaks

- 09.00 EU current account

- 13.00 ECBs Weidmann speaks

- 13.30 CAD retail sales

- 15.45 Feds Waller speaks

- 17.15 Feds Clarida speaks

- 18.45 ECBs Lagarde speaks

- 20.30 CFTC positon data


- Monday

- 01.30 PBoC rate announcement

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