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  • richard evans

Rangebound markets ahead of FOMC, BoE

Good morning

 

Currency markets remain stuck in a tight range as we await Fed and BoE rate announcements.  GBPUSD is at 1.2700, EURUSD at 1.0830 and GBPEUR 1.1725, each just a few pips from where they were this time yesterday.  Current thinking is that a Fed rate cut in March is too early, but a switch to an official neutral stance is likely, while BoE will be behind both ECB and Fed when it comes to cutting rates.  UK shop price data

 

This morning EU GDP which is widely expected to come out broadly in line with last month, that is for both q/q and y/y readings to come out at around 0%, highlighting the ongoing problems within the EU economy.  German GDP will also be released this morning, expected to come in worse than the overall EU readings.  With the market expecting bad numbers, I don’t think we’ll see much of a move in EUR after the release.  ECBs Lane speaks this morning, his comments are always closely watched and it will be interesting to see if he adds any fuel to the ECB rate cut ideas.

 

In Australia, the market has shrugged off a much lower than expected December retail sales reading overnight, November numbers were also revised lower.  Focus seems to be more on Aussie inflation numbers due tonight.  These are expected to show lower than last time which would make further rate rises from RBA less likely.  The risk perhaps is that the release disappoints to the upside which could see AUD strength.  GBPAUD currently 1.9220, the lowest level for a couple of weeks but still far above the 2024 lows at the start of Jan around the low 1.86s.

 

We wait to see what US are planning in terms of retaliation for the Iranian-backed attacks that killed three servicemen and injured over thirty more.  The US has made it clear they are not interested in a war with Iran, and will be looking for a proportional response.  However it seems clear that Iran funds and arms these rebel groups.  There had been talk of targeting Iranian ships in the Red Sea that it is thought have been used to help Houthis in their recent attacks.  Meanwhile there doesn’t seem to be any sign of a ceasefire in Gaza, with Israel and Hamas  far away from each other in terms of demands.

 

North Korea launched another series of cruise missile tests.  I remain concerned that North Korea will either deliberately target South Korea, or a stray missile will hit South Korean or ‘Western friendly’ Asian assets, perhaps by accident, perhaps not.  The last thing the world needs is more conflict, but North Korea do seem to be stepping up the rhetoric, perhaps thinking they can take advantage of the thinly spread West and its allies, currently spread between Ukraine and the Middle East.  I don’t like the look of this.

 

We have US JOLTS jobs data this afternoon, one of the Feds favoured releases and a precursor to Fridays US nonfarm payrolls.  Overnight we’ll see the BoJ minutes where we’ll be looking for any clues as to the timing for a move away from negative rates.

 

In other news, the Tories appear to have inadvertently highlighted the difficulties many families are currently facing as Mr Freeman, a Tory MP earning a reported £120,000 through salary and other work, has said he has had to quit his role because he couldn’t afford to pay his mortgage of £2,000.  By my quick maths, he must be taking home over £6,000.  It is said he’ll be able to earn more money outside government. 

 

Finally, Elon Musk has announced that his Neuralink company has successfully implanted a wireless brain chip in a human for the first time.  This is very early technology but the hope is that people who have lost the use of their limbs could benefit from such an implant, but of course the idea of something in your brain that can transmit effectively what you are thinking will strike fear in many, and not just the usual conspiracy theorists.  It’s an interesting future ahead.

 

-  09.00 German GDP

-  09.00 ECBs Lane speaks

-  10.00 EU GDP, consumer confidence

-  15.00 US JOLTS job openings, consumer confidence

-  23.50 BoJ minutes

-  23.50 Japan retail trade

-  00.30 AUS CPI

-  01.00 China manufacturing, non-manufacturing PMIs

-  07.00 German retail sales

 

 

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