Good morning
For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.
In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.
Friday was something of a non-day, the market largely ignoring the US durable goods and Michigan sentiment survey releases, with most currencies trading in tight ranges. Commodity currencies, AUD, NZD and CAD all lost a bit of ground through the afternoon into the London close, pushing up to 1.9605, 2.1660 and 1.8015 against GBP respectively. For AUD that’s the highest level since mid-Sept, for NZD it’s the highest since early August. Those moves have extended this morning, GBPAUD now 1.9655 while GBPNZD is 2.1720 .
Moodys have downgraded their France outlook to negative, saying the risk that France will not be able to tackle their debt and deficit is increased. This follows a similar move by Fitch a couple of weeks ago. Meanwhile ECB officials seem to be playing down a Dec rate cut, Wunsch saying there is no urgency to cut rates, Nagel saying ECB shouldn’t be too hasty in adjusting policy, and Knot saying the Eurozone economy is not as bad as some suggest and that the next rate move can only be decided in December, ie there is no set path for rates.
In Japan, the ruling LDP party has had a pretty disastrous election, winning just 191 of the 465 seats on offer and has lost its majority for the first time in fifteen years. The ruling coalition, LDP and Komeito, now hold 215 seats compared to the 288 they had previously. There was talk of PM Ishiba resigning but so far he doesn’t appear to have done so. USDJPY traded up to 153.85, now 153.35, GBPJPY saw a high of 199.35, now 198.85. Japan’s Nikkei opened nearly 2% lower but actually finished the day up nearly 2%.
Israel attacked Iranian military facilities over the weekend. They say they hit Iran hard, while Iran suggest the scale of damage has been exaggerated. Not sure we’ll ever know the truth, but the hope is that they are both now done and we see no further escalation. Fingers crossed and all that. For now, oil prices open sharply lower, WTI moves around 5% down to US$68, while Brent has seen similar moves, trading down from US$75.85 to US$72.50.
England once again managed to grab defeat from the jaws of victory, as they allowed Pakistan to almost double their run total for the final three wickets, going from 177-7 to 344 all out. England’s second innings was shocking, all out for 112 which gave Pakistan a tiny total to chase which they duly did losing just one wicket.
Spurs were poor, losing 1-0 to Crystal Palace. I take the blame for having said Palace and Forest recently lacked real quality in their match last Monday, Palace now get their first win this season and Forest move three points above Spurs in the table. Man City go top as Liverpool and Arsenal draw. Its going to be a long season!
Quite a lot of news, but therer is a good chance the markets today will be even more quiet than Friday. A quick glance at the calendar shows there is nothing in the way of significant data out today, BoCs Macklem who speaks after the London close could be interesting but that’s likely to be about it. Tomorrow has US consumer confidence and JOLTS job openings, and then Aussie consumer confidence overnight.
The real fun starts Wednesday when we will see EU GDP, german inflation and US GDP and ADP employment. The EU data could actually be more significant give the recent talk of 25bps or 50bps cuts at the next ECB meeting in December.
And of course Wednesday brings the UK budget where we’ll find out exactly who Labour are calling ‘working people’, who is being taxed more, and by how much. I don’t know if any of you saw BBC Laura Kuenssberg trying to get a definition of ‘working person’ from Bridget Phillipson, who dodged the question time and again. Labour do seem to have backed themselves into a corner, desperate to raise taxes but equally desperate to not break their election promises of no tax rises. Just raise the income tax rate and be done with it. But no, it’ll be more complicated than that. We just hope the markets take Labour’s plan of huge additional borrowing while trying to appear to be fiscally disciplined better than they took Truss/Kwarteng’s plan a couple of years ago.
Have a great day.
- 18.30 BoCs Macklem speaks
- 20.45 ECBs de Guindos speaks
- 00.30 Japan unemployment
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