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  • richard evans

Softer Aussie inflation sends AUD lower

Good morning

Yesterday wasn’t the most exciting in the currency markets, GBPUSD is 1.2730 and EURUSD 1.0943, not far off from where we were this time yesterday. GBPEUR is a touch lower at 1.1630, hawkish comments from ECB officials giving the single currency a smidge of support. A rate rise in July looks pretty certain, a Sept rise will be data dependent, but it is far too early to talk of possible rate cuts. ‘Higher for longer’ remains the key message. On Friday we will have the latest EU inflation numbers, before then we do have releases from individual countries which could set the tone for EUR.

The biggest moves came overnight, AUD weakened on the release of its monthly CPI data, it came in much softer than expected at 5.6% against 6.1% expected and 6.8% last time which will mean the RBA have a greater chance of standing still at their next meeting. GBPAUD pushed up from 1.9100 to 1.9240 before settling at 1.9175. Remember we were down at 1.8940 yesterday morning and the move to 1.9240 has marked a new high since May 2020, surpassing the Jan 2022 highs. Pimco have called an Aussie recession ‘inevitable’.

Yen weakness continues, USDJPY now just above 144.00 which brings GBPJPY to 183.40 and EURJPY to 157.70. Japans Kanda said they are watching currency moves with a ‘strong sense of urgency’ and they will ‘respond appropriately if it becomes excessive’, perhaps slightly stronger wording than previously used. For now, yen weakening is more stable and consistent rather than volatile, which may prevent Japan from actual intervention, but the higher USDJPY goes the stronger the wording will become and therefore it is more likely that they take action. Elsewhere in Asia we saw another high fix in USDCNY, this time 7.2101, not a huge gain on yesterday but pressure on CNY does continue. USDCNH did move higher after the fix, reaching 7.2350.

Not a bust calendar today but this afternoon sees Powell, Lagarde, Bailey and Ueda on a panel at Sintra although I don’t expect any significant news from there. My only thought is whether they make any mention of yen weakness, which would raise the potential for coordinated action, but this is certainly an outside chance.

Having made our way up to Liverpool on Friday, my sons passport arrived in the post yesterday. Very efficient service, but it does make me question why this system can be so quick and the online service suggested a wait of up to ten weeks. I don’t think the passport office are deliberately trying to force us into choosing the most expensive option, something like £165 for fast track against £85 online. I do think they are sensibly trying to temper expectations. But I got my application in on Friday late afternoon and we received in on Tuesday which really means a one day turnaround.

How can it therefore take maybe ten weeks online. Or had I done an online application, would it have been an equally quick turnaround, being about as plain and simple as it could possibly be, a kid who has lived all his life in the UK to parents who have also lived all their lives in the UK? We’ll never know. I am left feeling both pleased and disgruntled about the service overall. I should never have had to go to the lengths I did to ensure I had the new passport in time, but I’m pleased to have it now and I did get a weekend away out of it.

Second Ashes Test starts at Lords today, look out for Mark if you’re watching it as he’s gone to see it. He’ll be the one with a glass of beer in one hand and a glass of wine in the other……

- 11.30 BoEs Pill speaks

- 14.00 SNB quarterly bulletin

- 14.30 Feds Powell, ECBs Lagarde, BoEs Bailey, BoJs Ueda speak

- 21.30 US bank stress test data

- 00.50 Japan retail trade

- 02.30 AUS retail sales

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