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  • richard evans

Nervous calm? Is that a thing?

Good morning

If there can be such thing as a nervous calm, this is it. The situation in the Middle East is finely balanced. The sensible world is rightly condemning the Hamas attacks on Israel but behind the scenes I’m guessing much is being done to prevent a full scale invasion of Gaza by Israel. However with rockets still being used to attack Israel, I think unfortunately it is just a matter of time before we see reports of Israeli military action.

I don’t think the markets are pricing this in but it is difficult to find the best way of expressing this. Upside USD probably the way, so short EURUSD could be on the table although as usual it feels GBP could be more susceptible to risk shocks so maybe downside GBPUSD could work as well. May have missed the boat in GBPUSD for now though as UK wage data this morning supported the idea that BoE may not have to increase rates, GBPUSD slipping back from 1.2200 to 1.2170 as a result. As I mentioned yesterday, buying yen as a safe haven seems less popular for now than it has been in the past.

GBPUSD and EURUSD are broadly unchanged from yesterday with GBPUSD 1.2170, EURUSD 1.0535 and GBPEUR 1.1550. BoEs Dhingra speaks this morning, possibly the most dovish BoE official, although most attention will be on UK inflation data that is out early tomorrow morning.

Some decent action overnight in AUD and NZD. First, lower than expected NZ CPI numbers sent NZD lower, followed by more hawkish RBA minutes which showed they seriously considered a 25bps rise sent AUD higher. As you can imagine, the action was really in AUDNZD, which moved from 1.0685 to 1.0770. Not quite as big a move as I’d have expected actually but bear in mind we have spent much of October in the mid-1.06s then this latest push higher looks more important. 1.0785 looks like a key area. For the record, GBPAUD is 1.9155, GBPNZD 2.0635.

Plenty of meetings going on around the world. Biden will be in Israel tomorrow in a show of support, he will also be meeting the Palestinian Authority President Abbas in what I expect will be a push for them to distance themselves from Hamas. Biden also reported to be meeting the Jordanian King and Egyptian President to disucss humanitarian issues. The US have mobilised 2,000 troops for possible boots on the ground in the Middle East, it isn’t yet clear where or when they may be deployed, perhaps they will be there just for Biden’s protection. Meanwhile Putin is in China, a rare trip for him outside Russia given his outstanding arrest warrant for war crimes. He will meet Xi tomorrow.

In the meantime we will have US retail sales, Canada inflation, several central bank officials speaking and overnight China GDP. Feels like a pretty full calendar but the central bank officials are surely unlikely to offer anything spectacularly new.

Turning to sport, once again it is a bit difficult to be too upbeat after the shocking news of the killing of two Swedish footballer supporters in Belgium. As I type it is being reported Belgian police have shot a man who it is hoped was the attacker. The last thing we all need is for a flare up of terrorist attacks in Europe although with tensions running high I presume the fanatics will be more easily riled. Be alert.

England take on Italy this evening at Wembley in a replica of the Euro 2020 final which saw Italy lift the trophy after coming from behind to win on penalties. England will be looking for revenge although they’ll need to put on a better show than they did for the Australia match last week. I’ve just noticed that both England cricket and rugby teams take on South Africa on Saturday in their respective world cups. I can’t say I fancy our chances in either match. Thanks by the way for those posting yesterdays mistake when I said England cricket team lost to Bangladesh. It was indeed the mighty Afghanistan who beat England.

Have a great day, enjoy whatever sunshine you can find, it may be the last we see for a while…

- 10.00 German ZEW

- 10.05 BoEs Dhingra speaks

- 13.00 Feds Williams speaks

- 13.30 US retail sales

- 13.30 CAD CPI

- 14.15 US industrial production

- 14.20 Fes Bowman speaks

- 18.00 ECBs Nagel, de Guindos speak

- 23.30 RBAs Bullock speaks

- 03.00 China GDP

- 07.00 UK CPI, RPI, PPI

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