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  • richard evans

Softer than expected US inflation drives USD lower

Good morning

US inflation yesterday surprised a little to the downside, market had been looking for a headline YoY reading of 5.2%, actually came in at 5.0%. UDS weakened as you’d expect, EURUSD traded up to 1.1000 where it trades now, while GBPUSD is also pretty much at its post-CPI high at 1.2500, doing well to shrug off some rather disappointing GDP numbers this morning. 1.1000 and 1.2500 looking like tough levels to really crack for the time being mind you.

Fed minutes showed that members expect a small recession later in the year, very much based on the banking crisis. Some members would have pushed for a 50bps rate rise last time had it not been for those issues. I do wonder though that with much of the banking crisis seemingly averted whether Fed would now be less concerned about a recession and instead turn hopes towards a softer landing.

GBPEUR at 1.1365, actually a touch higher than its pre-GDP level but held very much within a tight range. A lot of hawkish EUR talk doing the rounds at the moment, ECBs Holzmann saying he looks for a 50bps rise at the next meeting, although the more dovish Villeroy has said there may be just a little more room to raise rates. BoEs Bailey made it clear his target was lower inflation and financial stability issues will not deter BoE from raising rates. BoEs Pill will be speaking this afternoon, previously pretty hawkish and I’m expecting more of the same.

The USD weakness also helped Bitcoin, you know I’m not a fan of crypto but always interesting to see how the price fluctuates, now trading just above $30,000. Gold also had a decent rally, trading up from $2008 to $2028 although lost those gains pretty quickly and now trades just around the $2010 level.

BoC left rates unchanged as widely expected yesterday, Macklem making it clear he did not see the outlook had changed much since the last meeting although he did play down the chances of a rate cut later this year. USDCAD moved down from the 1.3485 area to 1.3430 quickly after the US CPI, and that move has continued as I type with the pair now down at 1.3410. Macklem speaks again this afternoon.

China trade data was strong, showing a $88.19bn surplus as exports ramped higher. Some talk that firms are looking to move manufacturing away from China, Apple the current headline maker with production of iPhones in India tripling in the last year and the firm looking at Thailand to produce its Macbooks. Geopolitical tensions the main reason behind the shift.

Sad scenes for Tupperware stocks as the share price hits $1.30 after it warned it faces closure unless it finds new financing. Shares were as high as $38.50 in 2020 helped by lockdown-driven demand but has failed to keep that demand up. I’ve always had a soft spot for the brand, my Mum was one who held Tupperware parties and back then it must have been pretty incredible stuff. While it is still good, I think there are other brands doing a similar job. But who doesn’t have a Tupperware container in their cupboards? Probably missing a lid. If so let me know, I’m sure we have plenty of lids with no container. Hey there’s a business idea…matching old Tupperware containers and lids…you heard it here first.

- 10.00 EU industrial production

- 12.00 UK NIESR GDP

- 13.30 US initial jobless claims, PPI

- 14.00 BoEs Pill speaks

- 14.00 BoCs Macklem speaks

- 19.00 ECBs Nagel speaks

- 23.30 NZ business PMI

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