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  • richard evans

Sit back and wait for September....

Good morning

Fed did raise rates 25bps yesterday evening as widely expected. The accompanying statement was almost the same as last time, talking of data-dependency for future rate moves. There was very little of new comment to help us out, Powell just adding that the recent lower CPI reading was welcome but it is far too early to think the Feds fight against inflation is over. While the Fed may be somewhat undecided about the future, the fact the statement is so similar suggests not a lot has changed as such another 25bps rise next time is likely, unless of course incoming data takes a softer stance. What is becoming clear is the time until the first Fed rate cut is getting pushed out further. There is almost two months until the next meeting which will give the Fed plenty of time to digest that data and also assess the impact of rate rises up until now.

ECB rate meeting this afternoon where a 25bps rise is also expected although there is a feeling that ECB may then turn more neutral. A few ECB speakers have sounded more dovish recently while some economic data this month has been on the softer side. There will be no update to forecasts at this meeting, we need to wait until September for those. It is thought Lagarde could say something along the lines of ‘rates will be high for longer but ECB is data-dependent from here’. Quite how she puts this message across will obviously affect the fortunes of EUR.

The US dollar had been weakening going into the Fed announcement and this theme has continued since. GBPUSD is up at 1.2980, EURUSD 1.1130, both up at highest levels for a few days, USDJPY is down at 139.85 although has been as low as 139.40 overnight. BoJ rate announcement is due in the early hours of tomorrow morning, no policy changes are expected but yen could be volatile depending on Ueda’s comments. Markets still think there is a chance of some policy tweaks next time but it remains difficult to buy yen or hold long yen positions.

BoE rate announcement is next week, a rise is expected but whether we see another 50bps or 25bps remains to be seen. Some concern from various economists that BoE may be overdoing the rate increases but BoE’s eyes are firmly fixed on inflation which as we know is still running exceptionally high. As with Fed, ECB and BoJ, BoEs next meeting after this is in September. Enjoy any quiet times, I reckon September could be lively.

Before then we still have plenty to get our teeth into, starting with US GDP numbers this afternoon which are expected to show a small slowdown from 2% to 1.8%, numbers that won’t really both Powell and his rate outlooks. Japan CPI and Aussie retail sales come overnight.

In other news, sad to hear Sinead O’Connor has passed away. I wasn’t a great fan of hers although her single ‘nothing compares to you’ will remain an iconic feature of music for my generation.

I see British Gas half-year profits climbed to almost £1bn despite overall energy prices dropping. I do know companies need to make hay while the sun shines but I do find it a bit galling when everyone talks about the cost of living issues we face while large firms such as British Gas (they are not alone) are raking in the pounds.

And even though I’m running late, I have to mention the hearing yesterday in the US about aliens, or rather UAPs, unidentified anomalous phenomenon, or UFOs’ for the rest of us. Three witnesses shared stories of encounters with objects that were far more advanced than any earthly technology. There was talk of crashed alien craft and even that non-human biologics had been recovered. These statements were made under oath and yet I have a real problem believing them. Would a superior life form, capable of travelling huge distances through space, really crash into earth? However I don’t doubt there are phenomenon witnessed by pilots that remain unexplained. Exciting stuff.

Almost as exciting, if not quite as popular, was news that I saw yesterday that a new material, LK-99 could be a superconductor that operates at room temperature and in ambient temperature. A superconductor is a material that electricity passes through without encountering any resistance. As the moment superconductors only work in extreme conditions, such as at very, very low temperatures or exceptionally high pressure. If it were possible to have superconductor at room temperature it would be one of the most groundbreaking discoveries of our times. Don’t get too excited, there have been claims of such things before which have later been retracted, but just in case this is the real thing I thought I’d better mention it. OK, ‘excited’ may be the wrong word, but I do think at some point in our lives we’ll see a major breakthrough in some sort of technology.

- 13.15 ECB rate announcement

- 13.30 US GDP, durable goods, core PCE, initial jobless claims

- 13.45 ECB press conference

- 15.00 US pending home sales

- 00.30 Japan Tokyo CPI

- 02.30 AUS retail sales

- BoJ rate announcement

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