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  • richard evans

Some calm returns but GBP remains vulnerable

Good morning

After a volatile day yesterday GBP does seem to have settled down a little for the time being. GBPUSD found a bit of support around 1.0650 and as I type is trading up at 1.0800. GBP also made up some ground on EUR, the pair trading up from those 1.0800 lows to sit now just below 1.1200. It’ll be a key few days for GBP, we are far from being out of the woods but hoping a degree of calm has returned. BoE did make it clear that they will raise rates as required to fight inflation, and there is some expectation that we could have an intra-meeting rise before the next scheduled meeting in November.

I’m was half expecting a 1992 style rate increase to prop up the currency, fortunately we haven’t seen that! But I do note that some mortgage lenders are pulling offers to new customers over fears of sharp rate rises. Talk of rates near 6% by middle of next year will be worrying news for borrowers who have over-leveraged. We do hear from BoEs economist Pill today, plus Kwateng is facing bankers today, I’d like to know what he says on recent currency moves.

Feds Mester has said US inflation is proving more persistent and that more restrictive policy will be needed for longer. This is the same message the Fed have given for a while. Powell speaks this afternoon, should be on digital currencies but in case he does mention policy I can’t see any reason why he’d say anything different. I do wonder whether he will be mindful of the level of USD when he speaks.

So, some welcome calm so far. I still fear for GBP and for now would prefer to sell it than buy it. It is a difficult time for anyone needing to sell GBP, I’ve talked a lot about some of the low-risk structures we can offer and we welcome discussions with both current and potential customers before they pile into forwards at these levels.

It is the final day of voting in the referendums in Ukraine, the results are so certain there I very much doubt they will actually count the voting slips. When a soldier asks you how you will vote and watches you tick the ballot paper or even writes the result himself, it will be no surprise when the result is up near 100%.

More out of this world, I see NASA have successfully managed to fly a spacecraft into an asteroid to see if the impact can alter the course of the object. It is a test to see whether one day we could actually move a rock hurtling towards earth. Lets hope we never need to find out.

And finally, I mentioned the scandal in the chess world yesterday. Well Carlsen has now come out and openly accused Niemann of cheating. He’s offered no evidence, nor has anyone found any proof of the claims. He says he has more to say but cannot at this moment in time. Niemann meanwhile has offered to play naked to proof he has not electronic devices that would enable him to cheat. I.ll be watching with interest.

- 12.00 BOEs Pill speaks

- 12.30 Feds Powell speaks

- 12.30 ECBs Lagarde speaks

- 13.30 US durable goods orders

- 14.00 US house prices

- 14.00 ECBs de Guindos speaks

- 14.15 Feds Bullard speaks

- 15.00 US consumer confidence, new home sales

- 18.00 Feds Kashkari speaks

- 00.50 BoJ minutes

- 02.30 AUS retail sales

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