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  • richard evans

High prices here to stay?

Good morning

US stocks ended the week on a high, S&P was up over 3% as some US data came out weaker than expected, raising some doubt as to how far and how quickly Fed will push rates.

Friday was reasonably quiet once again in the currency markets, GBP struggled to hold onto any gains, GBPUSD testing and failing at 1.2320 just as it had done a few times earlier in the week, before slipping back to the 1.2265 area. This morning we have seen a weaker US dollar which has helped GBPUSD to just breach 1.2300 but whether we can finally break that 1.2320 area remains to be seen. EURUSD has also ticked higher through most of Thursday and Friday, now 1.0570, which means EURGBP sits at 0.8600 (GBPEUR 1.1630). UK MPs will have their first vote today on plans to drop part of the NI protocol. With support for Johnson waning it will be interesting to see how many MPs toe the party line. Johnson meanwhile has suggested he’ll look at another term in office. EUs von der Leyen has said it will make funds available to EU nations to prevent the need for those countries to go to China looking for money.

For those with Turkish interest, TRY has made a push higher as new rules are announced by the Turkish banking regulator that restrict loans to corporates if they hold more than TRY15m in foreign currencies. The idea is that firms may be forced to switch to TRY deposits or purchase domestic bonds. USDTRY had been trading around 17.35, dropped to 16.05 early this morning but has recovered to 16.70 as I type.

The G7 are in a meeting that started yesterday and runs until tomorrow, while NATO meets Tuesday until Thursday. G7 are worried about the global economic situation, concerned that high prices are here to stay. G7 announce a ban on Russian gold which looks to prevent Russia earning from exporting gold. Gold prices remarkably stable at $1835/oz, although some resistance creeping in around $1845.

Russia seems to have defaulted on US and EUR denominated bonds for the first time in a century, having failed to make coupon payments. Russia point out they have the means to pay, funds are ready but sanctions make it impossible to get payments to international bond holders. Russia don’t see it as a default, calling the situation a farce. It shouldn’t affect Russia’s chances of borrowing from western markets, sanctions have already put paid to that, but it could see some Russian debt becoming immediately payable. Quite how they would manage this is uncertain.

As Zelensky addresses the G7, asking for additional weapons, Russia continue their offensive against Ukraine and it seems they are making ground in the East of the country, with many cities almost reduced to just rubble. G7 confirm their indefinite support to Ukraine. Many reports of grain being stolen and taken to Russia, as Ukraine struggles to export its grain due to ports being blocked.

Two more pieces of news got my attention over the weekend. Firstly, the cricket, where, barring any collapse, England look set to win the third and final test against New Zealand after what really has been a great series which has seen the fortunes of both sides fluctuate regularly. I have to say as well, from the outside, it seems as though the matches have been played in a well-mannered and sporting way which is always good to see.

The other piece of news is the decision by the US supreme court who voted to overturn the right to an abortion. Protests have been seen, and having recently watched the Handmaids Tale I can see how the US are being likened to the strict rules of Gilead. I know it’s a tricky subject for many, one that certainly polarises views, but to remove rights from US citizens is a major step, one that Biden calls a terrible decision. Democracy?

- 13.30 US durable goods orders

- 15.00 US pending home sales

- 19.30 ECBs Lagarde speaks

- 20.00 ECBs Schnabel speaks

- 07.00 german GfK consumer confidence

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