Good morning
US retail sales yesterday looked good, the headline coming in above expectations although taking vehicles out of the equation the number was actually a bit on the disappointing side. This, together with weaker than hoped industrial production numbers, helped keep the US dollar under pressure although it is fair to say moves were pretty contained, EURUSD traded just ten pips or so either side of 1.0500 for much of the afternoon.
GBP, having been supported by employment numbers early yesterday morning, held its gains and indeed made ground against most majors, GBPUSD was up at 1.2720 and GBPEUR tested the 1.2110 level several times through the day. GBP also gained against the likes of AUD, NZD and CAD, those crosses trading at 2.0055, 2.2075 and 1.8205 respectively, the latter given a boost by lower than expected Canadian inflation.
This morning GBP lost some ground after the release of the latest UK inflation data. CPI, RPI and PPI were all pretty much in line with expectations, core CPI was actually a touch softer previous PPI readings were revised a little lower. GBPUSD had been 1.2710 before the announcement, it did tick higher to 1.2720 initially but has since lost ground to 1.2685. GBPEUR is off its highs, now 1.2090. Overall, the data is not enough to suggest we’ll see anything other than unchanged rates at tomorrows BoE meeting.
The FOMC rate announcement this evening is certainly the main event today. A 25bps cut is widely expected and certainly should be almost fully priced in. Focus will be on Powell’s comments in the statement as well as the updated forecasts from Fed officials, including the dot plot which gives an indication of where they think rates will be going forward.
The NZ Treasury half-year economic update suggests there is another 1.5% of cuts to come from RBNZ by the end of 2026. We could well see some volatility overnight as well, with NZ GDP and Aussie inflation expectations each with potential to move markets. NZ GDP is expected to be weak, but any weaker and the door is open for a third consecutive rate cut of 50bps at the next RBNZ meeting in Feb. Meanwhile we know RBA are still on the hawkish side, at the moment there is some question as to whether we are likely to see a rate cut from RBA in Feb or May. Numbers out tonight won’t decide that but the market will certainly factor it in.
AUD and NZD are weak at the moment. AUDUSD is 0.6310, lowest level for over a year, NZDUSD is 0.5730, the lowest for over two years. Against GBP they have both been at multi year lows, GBPAUD has been up to 2.0125, the highest since April 2020, GBPNZD to 2.1550, the highest since June 2016. Both crosses are off those highs after the UK inflation numbers but are still at historically elevated levels.
The BoJ rate announcement is in the early hours of tomorrow morning, the timing is always a bit vague, a bit like staying up for a big boxing match only to find it doesn’t really start for another couple of hours. Anyway, there had been talk a while back of a possible rate rise but that has been hugely downplayed recently and no change is expected at this meeting. Any talk from BoJ of a Jan rise could see a stronger yen but I can see this meeting coming and going with little fuss. For the record USDJPY is currently 153.60, GBPJPY 194.80.
League Cup quarter finals begin this evening, three matches taking place, while Spurs will take on Man Utd tomorrow. My money is on Arsenal, Newcastle and Liverpool all to get through.
On the subject of football, I watched the last episode of Ted Lasso yesterday evening. All three series were pretty good, bar a couple of what I would regard as filler episodes. It wasn’t quite the tear jerking ending I had been led to believe it would be but there was plenty of the feel-good stuff that has been the main ingredient for much of the show. There are suggestions that we could see a season four at some stage. Until then I’m looking for a new box set to get into in the New Year. Suggestions on a postcard please. Or do I just watch Game of Thrones again?
It’s a bit stormy here with some reasonable gusts of wind so take it easy if you’re heading out.
Have a great day
- 09.00 ECBS Nagel speaks
- 10.00 EU HICP
- 13.30 US building permits, housing starts
- 14.00 SNB quarterly bulletin
- 19.00 FOMC rate announcement
- 19.30 FOMC press conference
- 20.00 NZ Westpac consumer survey
- 21.45 NZ GDP
- 00.00 AUS consumer inflation expectations
- 01.30 AUS economic outlook
- 03.00 BoJ rate announcement
- 04.00 BoJ press conference
Comments