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  • richard evans

Powell sends USD up, NASA sends SLS up

Good morning

Yes I know it’s a bank holiday but I thought a few words about Powell’s Jackson Hole speech was warranted given the market impact. Powell made it very clear that the overall focus it to bring inflation down to 2% and to do so will take some time with a period of low growth and possible pain to households and the labour markets. He warned that the longer high inflation continues, the greater chance it will become entrenched and he stressed that the failure to restore price stability would mean far greater pain than that caused by Fed in working to bring inflation lower.

September rate rise will depend on data since July, I know we have had some slightly softer data from the US so it is possible that they will go with a 50bps raise, but having heard Powell I am thinking that unless data between now and then is really soft, they will want to continue to front load rates and go for another 75bps increase. UN nonfarms payrolls on Friday will, as always, be closely watched but so far we have seen little sign of weakness is US labour markets.

We had something of a rollercoaster ride in the currency markets over Powell’s speech. GBPUSD actually traded higher, reaching 1.1900 at one point before USD buyers jumped in and ran the pair down to mid-1.17s, the USD move continued overnight and this morning with GBPUSD down to 1.1650 at one point. EURUSD had a similar move, trading up to 1.0090 before dropping to a low this morning of 0.9915. Both currently a little off those lows but it remains difficult to see how anyone would justify selling USD right now, as such further declines in GBPUSD and EURUSD are likely.

On Friday I had looked at the 1.1700 GBPUSD put that expires today, it cost 20 usd pips and I must say when GBPUSD was up in the high 1.18s last week I wasn’t sure it would pay off. I could now buy spot against the option to guarantee a small profit but might as well leave it to run to see what our US friends do when the markets open.

In other news, well done to England for giving South Africa a bit of their own treatment in the second test match. I struggle to see how one team can win so convincingly in one match , then lose equally convincingly in the second match. You’d think it was possible match fixing if it wasn’t but no one would be that unsubtle and think they could get away with it. In football, Liverpool got their first win of the season with a 9-0 thrashing of newly promoted Bournemouth. Welcome back to the Premier League! Spurs remain unbeaten, together with Man City and Brighton (!) while Arsenal currently top the table with four wins out of four. You could say those four matches have been easy but even so they have looked pretty good.

Finally, if everything goes according to plan, NASA will launch its SLS Artemis spacecraft at 13.33 london time which, if successful, will open the door to a manned mission to the moon, the first for 50 years. Exciting times although with fuel prices as they are NASA may well be surprised at the bill when they come to fill up the huge 537,000 gallon fuel tank. Some of the numbers and statistics really are truly amazing and well worth a quick read, for example 92,000 homes could be powered for a full day by the heat the two boosters produce in their mere two minutes of operation.

- 14.00 ECBs Lane speaks

- 19.15 Feds Brainard speaks

- 00.30 Japan unemployment

- 02.30 AUS building permits

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