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  • richard evans

Sit back and wait for US CPI, just don't sit on the London Underground

Good morning

The US dollar tried to push higher after yesterdays US PPI release but the move was both shallow and brief. Majors have since pushed higher against USD, GBPUSD now 1.2320, highest GBPUSD has been since BoE left rates unchanged back in September, and EURUSD 1.0635, itself a high point since late Sept. GBPEUR remains in the high 1.15s, any attempt to get above 1.1600 doesn’t seem to last long. UK GDP this morning came in as expected although the previous reading was revised a touch lower.

GBP has done well to ignore this, as well as the weaker industrial and manufacturing production numbers that were also released this morning. In addition, interesting comments from BoEs Dhingra who says only 20-25% of the impact of rate rises have been fed through the economy. If this is BoEs thinking then surely further rate rises must be off the table until the full impact of the recent increases are fully felt.

JPY still bucks the trend, staying weak against USD and others. USDJPY climbed to 149.30 late yesterday and again tested up there overnight, right now it has settled at 149.10 leaving GBPJPY up at 183.65 and EURJPY 158.50.

The weakness in USD still seems to stem from more dovish talk from Fed officials. Feds Waller said he was pleased with the last three months of inflation data, he also added that the current fiscal policy in US is unsustainable, Feds Bostic unsurprisingly repeated comments from the previous day, no reason to think he’d change his mind, namely the Fed seem to have done enough, the economy is slowing, rates will remain high for a longer period of time, before adding that Fed could do more if necessary. Feds Collins adds that Fed will factor in the current unrest in the Middle East during their policy decision making and that Fed can be patient. She is in no rush to move on rates.

New Zealand will be holding a general election this weekend. RBNZ Gov Orr has said the effects of the rate rise cycle are flowing into the economy as anticipated, rates will remain high for the foreseeable future in order to get inflation back to target.

In other news, various things have caught my attention. The fire at Luton airport has caused disruption for many holiday makers. The car park, which was only three or four years old, suffered a structural collapse after one car caught fire, which spread quickly to other cars. There were no sprinkler systems in the car parks. Some 1,500 cars were in the car park at the time, many are damaged, some are undamaged but with the building being unsafe it could take a while getting them out.

NASA yesterday gave us a quick glimpse of part of the sample collected and brought back to earth from the asteroid Bennu. It was mildly underwhelming, I’m not sure what I was expecting to see mind you but it didn’t look too dissimilar to the scraps left in the bottom of my coal bucket. The bulk of the sample is still locked inside the main canister which is expected to take another couple of weeks to open.

I’m on my way into London today, and I do quite enjoying sitting back, doing the crossword and even having a little nap. All that might change today though, I read that bed bugs have been spotted on the London underground. The French are having an awful time with bed bugs at the moment, images of mattresses being thrown onto streets are surfacing on the internet.

Some suggestions that bed bugs could have entered the UK via Eurotunnel and although we can’t fully blame France given we do have bed bugs here as well, I’ve travelled on the tube for years without seeing any such thing, so it is unlikely to be coincidence. Paris does seem to be in the throes of a crisis with pest experts warning that these latest creatures are more immune to insecticides. So, will I stand, or brave the seats. My guess is that I will think of standing, then spot a nice comfy seat on its own and settle down for duration of the journey, hoping for the best.

Finally, the weather seem to have turned. We had pretty heavy rain yesterday evening and it looks like more of the same today and tomorrow. The weekend looks sunnier but don’t be fooled, overnight temperatures are forecast to hit 1° on Sunday night. It has been a long time since we had anything that cold. Before we all start complaining, worth remembering that bed bugs don’t like the cold. Get those windows open!

US CPI numbers are out this afternoon, very much the focus of the financial markets at the moment. The headline YoY is expected to dip by 0.1% to 3.6%, with the core reading expected at 4.1% from 4.3%. Any significant move away from these numbers could push markets around. Wouldn’t be surprised to see USD moving around through the day ahead of the data, perhaps driven by position reduction.

- 12.00 ECBs Panetta speaks

- 12.30 ECB minutes

- 13.30 US CPI, initial jobless claims

- 19.00 US monthly budget statement

- 22.30 NZ business PMI

- 02.30 China CPI, trade balance

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