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Hospital attack sees Middle East tensions run high ahead of Biden visit

Good morning


UK inflation numbers this morning were not as soft as expected, the headline coming in at 6.7% against expected 6.5%, the higher fuel prices offsetting slightly lower food prices. The Core headline was 6.1%, lower than last month but still not at the 6% level the market was hoping. GBPUSD hit a low overnight around 1.2160, GBPEUR around 1.1510, the stronger dollar helped be decent US retail sales numbers yesterday. We were already off those lows when the numbers came out, GBPUSD actually reached 1.2210 after the release, now just a few pips lower, GBPEUR got to 1.1535. The decision makers at BoE will certainly be earning their money.

We have EU inflation numbers this morning, these are expected to be on-line with the previously released estimates. Some thinking any revision higher will be more down to rounding of numbers rather than significant uplift. ECB rate announcement next week but it would be highly unlikely to see anything other than ‘no change’. Lagarde also speaks this morning, she rarely sets the world alight but we’ll be watching whether there are any new ideas as to ECB thinking given the proximity to both the inflation numbers and the next ECB meeting.


Overnight we also had China GDP and retail sales numbers, all of which surprised to the upside, Might be true, who knows. AUD certainly reacted positively to the news, GBPAUD traded down from 1.9140 to a low this morning of 1.9075, although the UK inflation numbers then took the pair back above 1.9100. AUDUSD moved from an overnight low of 0.6350 to 0.6395 this morning, now 0.6375. AUDNZD also higher, now 1.0810, up from 1.0620 just a week or so ago. RBAs Bullock speaking overnight was also on the hawkish side, saying RBA very alert to upside inflation risks.


Putin is in China meeting Xi, they have spoken a lot about the wonderful Belts and Roads Initiative (BRI) that has now been around for ten years, plus of course how China, working together with Russia, can create a new world order to oust the West. Not quite their words, but that’s the idea. The BRI has seen large infrastructure built around the world such as trains, ports and pipelines. To give an idea of the global reach of the project, leaders from Ethiopia, Sir Lanka, Nigeria, Chile, Kenya, Hungary, Egypt and Laos are also present.


The BRI has no doubt helped some nations although BBC reports that Kenya have a railway under the scheme that opened in 2017 running between Mombassa and Nairobi, a useful project itself but building has stopped far short of the promise of reaching other African nations, particularly for cargo transport, Kenya now has £4bn in loans to predominantly Chinese banks. Sounds terrible but I imagine this is what US have been doing for years as well.


Attention on Middle East continues this morning as both Hamas and Israel blame each other for the explosions that destroyed a Gaza hospital killing hundreds of people. Israel vehemently deny they were involved, and claim they have proof a misfired rocket from Islamic Jihad caused the carnage. It would indeed seem unlikely that Israel would deliberately target a hospital, although unfortunately it cannot be written off completely. Hamas are insistent Israel was behind the incident.


Hopefully the truth will emerge although with little firm evidence it is impossible for us to really know what happened. Tensions remain high, the explosion came on the eve of Biden’s trip to Israel. His meeting Palestine’s Abbas, along with Egypt and Jordan, has been cancelled following the hotel bombing. A huge loss of life, we can only hope that out of such suffering and destruction comes something of a ceasefire. I’d imagine Biden will be urging Israel to be careful and cautious with its retaliations to the Hamas attacks last weekend.


It almost seems wrong following such devastating news with something on a lighter note, but we do have to cheer England football team which bet Italy 3-1 at Wembley yesterday, revenge for the Euro 2020 defeat. England have now qualified for Euro 2024 with two group matches still to play. Great news, but the celebrations weren’t quite on a par with those of San Marino yesterday who scored a goal for the first time in over two years. They lost the match but the goal celebrations would have you think they had won the tournament itself.


Netherlands was as underdog that actually did the unthinkable yesterday in the cricket world cup as they destroyed previously unbeaten South Africa. You’d have had some decent odds on that.


The weather looks like it’ll be taking a turn for the worse today, so hunker down. I’m due to be travelling to the Isle of Wight today, the weather puts those plans in some jeopardy, I’m not bothered about the rain but the high winds down there could affect travel. I’ll see what its like a little later before I set off. I’d hope the ferry still goes even if the faster catamaran has some service disruption.


- 10.00 EU HICP

- 10.00 ECBs Lagarde speaks

- 13.30 US housing starts, building permits

- 17.00 Feds Waller speaks

- 17.30 Feds Williams speaks

- 18.00 Feds Bowman speaks

- 19.00 US Fed beige book

- 23.55 Feds Cook speaks

- 00.50 Japan trade

- 01.30 AUS unemployment


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