Lets not talk about football...

Good morning

GBPUSD is at 1.2420 as S&P revised UKs ratings from negative to stable. They see the risks to the UK economy have reduced since the budget debacle back in September 2022. There are still major concerns over inflation, BoEs Ramsden said over the weekend that they must ensure inflation doesn’t become embedded in the economy. The market is pricing nearly 75bps of more rate rises to come this year. On the other side of the pond though, S&P downgraded eleven regional US banks who they say are feeling the strains of managing their liabilities.

ECBs Wunsch says markets are underestimating how high ECB rates will go, he says they could hit 4% and will only stop once wage growth starts to fall. The Fed on the other hand are likely to offer one more rate rise of 25bps at their May meeting but it is then thought this rate rise cycle could end. We won’t hear from Fed officials until the FOMC meeting next week. EURUSD is trading up at 1.0980 but so far still struggling to get back over 1.1000.

BoJ are planning a comprehensive assessment of policy. Any serious change to the policy that has been in place since pretty much 1999 will take a good amount of time and planning. Ueda has been talking about BoJs eventual exit from its ultra- loose policy, adding that BoJs large EFT holdings will become an issue at some stage. USDJPY holds above 134.00, currently 134.25, GBPJPY up near 167.00. Ueda will hold his first policy meeting later this week but it is highly expected there will be no major changes in policy. Still see interest in long yen positions but it is expensive to be long yen, as such positioning for a move lower in UDSJPY, EURJPY or GBPJPY probably doesn’t meet the full potential.

The FA Cup final will be an all-Manchester affair this year as both Utd and City won their respective semi-finals, Man Utd only just overcoming Brighton after a penalty shootout that saw twelve penalties scored in a row, the unlucky thirteenth was missed by Brighton. Other than that we don’t really talk much about the weekends football after a shocking display from Spurs that saw them three goals down inside the first ten minutes, eventually losing 6-1.

I assume you all got a test alert on your mobiles yesterday afternoon. The fact that is came at half time in the Spurs match obviously led to the usual raft of funnies about the alert announcing a pending disaster for Spurs. But seriously, we hope that the alert system will never have to be used but I guess its good to know its there just in case.

Not a lot on the calendar today, it does get busier later in the week, for now though there is something of a holiday feel to the day, helped in part by the rather bright sunshine I see out of the window. Its not expected to last the whole day mind you so enjoy it while it lasts….

- 09.00 German IFO

- 10.00 ECBs Panetta speaks

- 13.30 US Chicago fed national activity index