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Still waiting for a US debt limit deal

Good morning


We are edging towards a US default as talks still lead to nothing although there is perhaps a little more optimism that a deal can be struck that would kick the can down the road to beyond 2024. It would take a few days to get the appropriate legislation drawn up and passed so we really need to see something today or over the weekend to ensure it is all in place in time to avoid a default.


The US dollar has been reasonably strong, GBPUSD now 1.2345, EURUSD 1.0730, both off yesterdays lows mind you, and USDJPY at 139.60 having briefly broken 140.00 late yesterday. USDCNY fixed 7.0760, another high print. Some talk that Chinese state-owned banks were selling USDCNY in an effort to slow down the recent rally.


UK retail sales showed a slightly mixed set of numbers with MoM coming in slightly higher than expected, YoY slightly lower but still better than last months reading.


ECB officials continue to sound mostly hawkish, Knot saying June and July rate rises are pretty much priced in and from there decisions are likely to be data dependent, adding that rates will need to stay high for a long time to counter inflation.


South Africa raised interest rates 50bps to 8.25% in a unanimous decision. This failed to help ZAR, instead USDZAR leapt higher to 19.80, taking GBPZAR to the 24.40 area. The South African central bank did say there is potential for further Rand weakness and that while inflation risks are to the upside, policy at current levels is restrictive. Are they saying we will see no further rate rises? Would explain ZAR’s sharp decline.


So onto the weekend, our third long weekend this month and also school half term next week which gives the kids a break from their exams. Whether they spend that week revising for the next set of GCSEs and A levels depends largely on the child in question. One of mine certainly will, the other only will if forced to do so. Weather looks like it’ll be terrific, of course I’ll be out mowing the lawn and might even have to attack some of the weeds that are looking far too healthy and comfortable.


We also have the last day of the premier league which puts Spurs (my team) up against Leeds (Marks team). If Spurs win, Leeds are relegated. That’s a big ‘if’ mind you. Spurs have nothing to play for and even if they did they haven’t been firing on all cylinders recently so Leeds must fancy their chances given they are fighting for survival.


- 13.30 US durable goods, personal income/spending, core PCE

- 15.00 US Michigan sentiment survey



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