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  • richard evans

It's all about the dollar, focus on jobs data

Good morning

The US dollar gave back a small part of its recent gains, a surprisingly weaker than expected ADP employment number helped GBPUSD up to 1.2175 and EURUSD to 1.0530. Reasonable PMI numbers that followed did take USD off those levels but overall both pairs ended well above yesterday morning lows, now 1.2145 and 1.0510. GBPEUR watchers will note this brings the cross to 1.1555. The 1.1490 lows from last week now create an even more significant support area.

Overnight we saw some excitement in Yen, with USDJPY trading down from the 149.00 area to 148.25, yen crosses followed suit with GBPJPY down to 180.30. Both are now higher, USDJPY at 148.85, GBPJPY at 180.70. Whether or not this was intervention related remains to be seen although the move was pretty shallow so although we won’t rule out official action, it is less certain.

For now we are really being led by US dollar and its rates outlook. The slight dip in USD yesterday was in the most part down to lower rate rise expectations after the ADP. However I have seen some players looking for a strong nonfarm reading which could turn USD sentiment higher once again.

A strong Aussie trade balance overnight gave AUD some support, GBPAUD moved from 1.9175 pre-release to hit a low overnight of 1.9070, Similarly, AUDUSD rose from 0.6325 to 0.6375, although AUD has given up a lot of those gains in the early hours of this morning, with GBPAUD now 1.9140 and AUDUSD 0.6340. AUDNZD also had an attempt to push higher from 1.0700, got as far as 1.0720 but finds itself back at 1.0700, testament to NZD resilience.

Romania interest rate announcement today where rates are expected to remain unchanged at 7%. There is a general feeling that while rates may not rise, they will be slower to eventually decline than ECB rates. If we see any hint of hawkishness or suggestion that rates are stuck at high levels EURRON could drop back a touch but I’ll be more interested in any impact on forward prices. A good chance though that this meeting comes and goes with little fuss.

Sunak spoke yesterday, I won’t go into too much detail but there is a lot of attention on the cancellation of part of HS2. HS2, while it doesn’t affect me directly, is being built a few miles from where I live so I get to see the impact on the countryside first-hand. There is no doubt the engineering is impressive and I remain of the opinion that we do need to update and modernise our infrastructure for the future, even if it is at the expense of some green belt land. But to build a route that only gets as far as Birmingham at high speed is pretty daft.

We want cheap, fast rail travel, but it doesn’t look as though we’re going to get that. Sunak mentioned times are changing and requirements are changing and I do get that. Rail travel has fallen and it isn’t sensible to spend loads of money on a service that people won’t use. However, if the money spent on HS2 had been used to improve existing trains and go go some way to being down fares, I think rail travel would quickly increase. I went to Liverpool earlier this year and ended up driving as the overall journey was about the same time and the train tickets would have cost an absurd amount of money. Guess we are better on the roads where it is easier to tax us.

Anyway, for a long time I have said that HS2 is not about high speed travel to the North. Instead, take a look at the route in between London and Birmingham. Once it is through the Chilterns, the line goes through swathes of countryside. Plenty of space for new towns to be built along the way, all with a ready-made train direct into London. Perhaps the government is actually looking forward and thinking about housing projects many years down the road.

Rugby returns to our screens today as New Zealand take on Uruguay in the next tranche of world cup matches. England, Scotland and Wales al play on Saturday.

The cricket world cup begins today, England the current holders are second favourites behind the hosts, India. The tournament kicks off at 9.30 this morning with a repeat of the 2019 final which saw England beat New Zealand on boundary count-back after the match itself and the super-over both ended all square. Could be a thriller. Our friends in NZ are going to have to be up overnight to catch the action, they might as well make it an all-nighter and watch the rugby while they are at it.

- 10.45 ECBs Lane speaks

- 12.00 Romania rate announcement

- 12.30 US challenger job cuts

- 13.30 US initial jobless claims

- 14.00 ECBs Nagel speaks

- 15.00 ECBs de Guindos speaks

- 15.00 CAD Ivey PMI

- 15.00 ECBs Nagel speaks

- 01.30 RBA financial stability review

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