Good morning
I’ve been out of the office for a couple of days, spent much of the weekend up in Norfolk which is always a terrific place if only it were just a bit easier to get to. I guess the difficulty in getting there, and by difficult I really mean slow, is part of what has kept it broadly unchanged for so long and therefore what gives it much of its charm. Mind you I wasn’t saying that on Saturday night when we were nearly caught in a blizzard on some pretty rural road.
As we do in the UK, when I mention snow and blizzard, what I mean is it was quite heavy and started to settle, not quite the snow that other parts of the world get, but when you are in the middle of nowhere in the evening, pitch black, with the most snow I’ve seen for a long time not only falling, but actually settling on the roads, it can be quite alarming. Of course we made steady progress to where we were staying and arrived with the minimum of fuss, but it was exciting for a while. Fortunately the next couple of days were clearer and we actually got a decent amount of sunshine yesterday before we made our way home.
So here I am, back at my desk and wondering what has changed. Well, USD is still soft despite last weeks higher than expected CPI and PPI, the market focussing more on the softer US retail sales data that came out on Friday. GBPUSD has seen a high around 1.2630, we are now just 15 pips or so off that level, while EURUSD did reach up to 1.0510 after the US sales numbers last week but failed to hold those gains and is now 1.0460, which puts GBPEUR back up to 1.2060, matching the high from early Feb, EUR held back on warnings that Eurozone growth will be lower than had been forecast back in November.
Elsewhere, RBA< one of the more hawkish central banks, cut rates overnight 25bps from 4.35% to 4.10%, the first cut since the Covid era which saw rates cut from 0.25% to 0.1% back in November 2020. Rates had been 4.35% since November 2023. The move had been widely expected and as a result AUD is broadly unchanged. RBA did warn that upside inflation risks are still very much alive and as a results played down the chances of further rate cuts.
Plenty of talk over peace in Ukraine, with Trump seeking to find a solution, seemingly regardless of Ukraine’s acceptance. In the end Ukraine will probably have little choice but to accept whatever peace deal comes along but they are determined to be included in the talks, which is fair enough. They will no doubt need to agree to give up swathes of land already captured by Russia since the invasion began. There is growing talk of peacekeepers on the ground in Ukraine after a peace deal, which would likely put UK and EU forces, perhaps also US forces, within an arms reach of the Russian army. The Telegraph has an article that suggests Trump is demanding a US$500bn payback from Ukraine in reparations which would pretty much US owns the country and its resources and infrastructure for pretty much always. Another US state?
UK employment numbers this morning looked decent enough, the overall unemployment rate held at 4.4% rather than increasing to 4.5% as had been expected but this alone isn’t enough to offer any major optimism. Even the better employment change at +107k was partly offset by a higher claimant count.
In sport, Spurs actually managed a second premier league win in a row over the weekend, an important one at that as it moved them up to 12th in the table, but there is a worrying points gap now between 12th place and the European places. The result pushed Man Utd down to 15th, Everton moved above them as their revival continues. Liverpool are seven points clear at the top, Arsenal now clear in second with Forest and Man City talking the next two spots. Bournemouth are flying high in fifth having taken a decent 13 points our of the last 18 available.
Also in football, I see Leeds got a couple of late goals to turn what would have been a disappointing (for Mark) loss against Sunderland into a win that put them back to the top of the table. Meanwhile I see Burnley, currently third in the Championship, have conceded only nine goals in 33 league matches so far, a pretty impressive feat. They have now gone 1,000 minutes without conceding a league goal. Incredible.
Back to the markets and today has a slightly limited calendar, Canadian inflation numbers likely to be the highlight, while overnight the expectation is that RBNZ will cut rates by 50bps again to bring rates to 3.75%.
Early tomorrow morning we’ll have the latest inflation numbers from the UK, we’re thinking both CPI and core CPI will show gains which may well keep GBP reasonably supported.
In the meantime, have a great day. I see more sunshine peeking in through the window, a welcome sign after what feels like weeks of grey, low cloud.
- 09.30 BoEs Bailey speaks
- 10.00 German ZEW
- 13.30 US NY empire state manufacturing survey
- 13.30 CAD CPI
- 14.00 ECBs Cipollone speaks
- 15.20 Feds Daly speaks
- 18.00 Feds Barr speaks
- 21.45 NZ PPI
- 23.50 Japan trade
- 01.00 RBNZ rate announcement
- 07.00 UK CPI, PPI, RPI
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