Good morning
Welcome to October, and with it the 4th quarter of 2024.
We saw a little USD strength after a very slightly better Chicago PMI number but as we’ve become used to recently, the initial move soon unwound and we saw GBPUSD move from its lows around 1.3360 up to 1.3415. Overnight it was pretty rangebound, but as I type GBPUSD is back down at 1.3350. I’m wondering whether this most recent bout of USD strength is down to some safe-haven flows as news emerges that Israeli troops are on the ground in Lebanon.
This move off the lows yesterday did seem to be more of a GBP move. EURUSD had slipped from above 1.1200 to 1.1140 through the afternoon but any recovery was limited and by the London close we were still down around those lows. This put GBPEUR up at 1.2025, other GBP crosses were also off the day lows after the late afternoon GBP rally. The moves this morning do seem to be more USD-led, EURUSD is also lower at 1.1115, GBPEUR holding above 1.2000.
Several Fed officials were speaking yesterday, Bowman repeated her concerns about high core inflation, while Goolsbee wants rates to be lowered further. Bostic went so far as to call for another 50bps cut if employment numbers are weak. Feds Powell gave little away, saying that the Fed are confident on inflation returning to target, and that the labour market is still strong despite cooling. Rates will move lower but there is no preset course and moves will be decided on a meeting by meeting basis. He doesn’t seem to be in much of a rush.
Lagarde was also speaking yesterday, she too suggested ECB were confident inflation was under some control and that today’s HICP reading could come in below the 2% target. She does add that Q4 may see a slight uptick in inflation but overall the trend is lower.
Elsewhere, Aussie retail sales overnight were stronger than expected which gave AUD a boost. GBPAUD is currently 1.9320, it did test the 1.9280 level a bit earlier, worth watching that area as it has been tested, and held, a few times since July. In New Zealand however things don’t seem to be going so well. RBNZ meet on 9th Oct and there is growing feeling they will follow their August 25bps cut with a 50bps this time, and perhaps another 50bps cut in November. AUDNZD is up, trading as high as 1.0950, the highest level since August. GBPNZD though is at 2.1180, exactly the midpoint between the 2.1000-2.1360 range we’ve had since August.
China’s recent stimulus measures have been helping the Chinese equity markets and overnight we saw yet another 8%+ rally in their major indices which puts them back into positive territory for the past year. This cannot all be down to the stimulus, I can’t help thinking there must be some ‘official’ buying of stocks, although I’ve seen nothing to confirm this.
I’ve been complaining a lot recently about the rain we are having, which, give or take the odd day or week seems to have been going on through the entire summer to now. I have to admit that as bad as it is, I’ve seen images from Florida of the damage caused by Hurricane Helena where some 100+ people have lost their lives and over 1000 are still missing, with over 1 million people still without power. It really doesn’t look good and I don’t think we’re really seeing the true scale of the disaster. Perhaps I should stop complaining.
Yesterday marked a big day in the UK’s energy generation as the last coal power station closed. Coal is known to be one of the dirtiest fossil fuels and we’d imagine the closure of the plant should be lauded. However we still pay a lot for our energy in the UK and the renewable alternatives are not quite as stable, being so hugely weather dependent. Until we can properly harness fusion power, still several decades away, we’ll be heavily reliant on both nuclear and renewables. I’d imagine we’ll also probably be more reliant on other countries to provide our power. While reducing emissions is important, I’d rather not be reliant on other countries for energy.
This morning brings the EU inflation numbers, this afternoon we will have ISM PMIs from the US, plus the JOLTS jobs data, the first set of US employment numbers this week that will culminate on Friday with the nonfarm payrolls. Weak employment numbers could steer the Fed towards another 50bps cut at their November meeting. They got away with the previous 50bps cut but at some point people must be thinking 50bps cuts point to a bit of panic that they are behind the curve.
Have a great day
- 08.55 German manufacturing PMI
- 10.00 EU HICP
- 14.30 CAD S&P manufacturing PMI
- 15.00 US manufacturing ISM, JOLTS jobs
- 15.00 BoEs Pill speaks
- 15.00 Feds Bostic speaks
- 16.10 Feds Cook speaks
- 23.15 Feds Barkin, Bostic, Collins speak
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