• richard evans

Risk sentiment up, US dollar down

Good morning

Some slightly better risk sentiment seems to be putting the US dollar under pressure

France warns of retaliatory measures if more fishing licences are not granted in the next couple of weeks. I reckon the French have appoint, I am sure the UK is playing by the rules but I am also sure that we are making life as difficult as possible for those French fisherman.

Poland has warned the EU it faces collapse if it tries to blackmail Poland by withholding billions of Euros from the recovery fund. The EU must surely stay firm, if it ‘let’ the UK leave then it shouidn’t have a problem letting Poland go. Quite what would happen to Eastern Europe if they did remains to be seen, Russia would no doubt jump at the chance to offer support to Poland instead. I do remember reading a long while back that the next major war could well be in Europe. I’m not sure I go along with this, although if someone had told me a couple of years ago the world would shut down due to a global pandemic I’d probably have found that a little far-fetched as well.

AUDUSD has traded up to Sept high around 0.7475 on the weaker USD, but does lose a little ground against NZD as RBA minutes suggest they are seeing an economic recovery a little slower than they’d hoped back in late 2020/early 2021. They make it clear they will not raise rates until inflation is stable in a 2-3% band. By Dec this year they expect the economy to be back to growth. Clearly a little hopeful that they have turned a corner, Covid-wise.

Speaking of Covid and turning corners, I must say I have hardly seen any government Covid news or headlines recently? I don’t avidly watch the news so I’m sure some mention is made of it but I wonder whether things really have improved so much or whether there is a deliberate effort to tone down Covid messages. I know if schools are anything to go by there isn’t really a let up in cases, but I do see seven day average death rates are running at 124 which is high compared to the last few months but relatively low compared to the peak in February. There is talk of a new variant, Delta-plus, which as you’d imagine from the name is the good old Delta variant, but a little more infectious. Its still not gone away….

North Korea have launched a ballistic missile from a submarine in another of a series of tests, while China actually denies it had tested a hypersonic missile. Strange, if I was China I’d let everyone think I had, even if I hadn’t. I’d love to know what really goes on. It does seem as though the US is falling behind in technology but we do know they have the ability to keep cvertain projects very quiet and I’d hardly be surprised if one day we found they are still at the cutting edge of new weaponry.

UK inflation is out early tomorrow morning which could well cement market expectations of a rate rise next month. A headline of 3% or above will certainly be enough. This GBP strength we have seen against USD is not a result of rate expectations but more in line with general USD weakness.

Finally, as you’ve probably worked out by virtue of the fact you are still receiving this report, I wasn’t the lucky winner of the Euromillions jackpot of £184m. The jackpot was instead scooped up by someone in France. Maybe they can buy a couple of fishing boats with the money.

- 10.00 EU construction output

- 11.00 BoEs Mann speaks

- 13.05 BoEs Bailey speaks

- 13.30 US housing starts, building permits

- 18.15 Feds Bowman speaks

- 20.00 Feds Waller speaks

- 00.30 AUS Westpac leading index

- 00.50 Japan trade balance

- 02.30 PBoC rate announcement

- 07.00 UK CPI, RPI, PPI

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