Good morning
USD pushed higher yesterday as risk sentiment waned once again, this time a lower than expected US consumer confidence number seems to be a key drive. GBPUSD fell through the afternoon to reach 1.2175 overnight, an area it tested once again this morning. Currently at 1.2190. EURUSD saw a similar move, trading down to 1.0505 yesterday and actually traded to 1.0485 this morning although has ticked back above 1.0500 as I type. GBP has fluctuated a few points either way against EUR but now at 0.8620 (GBPEUR 1.1600) it is back to where we were this time yesterday morning.
The stronger dollar has sent USDJPY higher, currently 136.15 although the declines in EUR and GBP mean EURJPY and GBPJPY are both a little lower than yesterday at 143.00 and 165.85 respectively.
The consumer confidence number is not the first US release that has been weaker than expected, leading to some to look for a smaller 50bps rate rise by Fed at their next meeting, rather than the 75bps that most are calling for. This would likely see USD retreat, we’ve so far seen little sign of this but certainly worth watching to see if this thinking spreads in the coming weeks before the FOMC meet on 27th July. US GDP out this afternoon although this is the final reading so unlikely to impact markets. Feds Daly has played down chances of a recession but the ‘R’ word still appears on a regular basis.
In Europe, France have cut their 2022 growth forecast to 2.5% from the 4% they expected earlier in the year, blaming much of the drop on the Russian invasion of Ukraine. Turkey have dropped their veto which opens the door for Finland and Sweden to join NATO, likely to be discussed at todays NATO meeting where Russia are obviously high on the agenda but challenges posed by China are also on the table.
Aussie retail sales beat expectation overnight although this hasn’t offered any support for AUD with AUDUSD down to 0.6885, AUDNZD to 1.1040 and GBPAUD back up to 1.7700 from 1.7600 yesterday afternoon. RBA rate meeting next week, RBAs Lowe has indicated either a 25 or 50bps rate rise is likely, market seems more focussed currently on a 50bps move.
ECB forum in Sintra continues with Powell, Lagarde and Bailey appearing on the panel this afternoon. Some attention actually on Bailey and whether he will offer any thinking on a possible 50bps rate rise from BoE, rather than the more standard 25bps move. UK GDP out early tomorrow morning will attract some attention, question for today is whether GBP can at least hold current levels or whether further declines are likely. For the moment a lot depends on the US dollar. That 1.2320 area looks a long way away now!
- 09.45 ECBs de Guindos speaks
- 10.00 EU confidence data
- 11.15 ECBs Schnabel speaks
- 11.30 Feds Mester speaks
- 13.00 German CPI, HICP
- 13.30 US GDP, Core PCE
- 14.00 Feds Powell, ECBs Lagarde, BoEs Bailey speak
- 16.00 ECBs L:agarde speaks
- 00.50 Japan industrial production
- 02.00 China NBS manufacturing, non-manufacturing PMIs
- 07.00 UK GDP
- 07.00 German retail sales
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