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  • richard evans

Support for USD after hawkish Fed comments

Good morning

Feds Bostic kept in line with recent comments saying the fight against inflation is still in the early days and that rates need to be up to around 4.5% by year end. He did add that he’d like to see a pause after reaching that level to see how the economy reacts. USD found support into late afternoon although that did run out of steam into the evening, while it has remained reasonably stable overnight. USD should continue to find support while we get these messages from the Fed, certainly unless or until we start to see a turn in economic data.

Fitch has become the second major rating agency to out UK on negative outlook as result of the mini-budget. They say the fiscal plan could lose support and undermine the government in the wake of the volatility in the financial markets, and lead to a significant increase in fiscal deficits in the medium term. GBP slipped against USD, trading as low as 1.1230 yesterday afternoon but soon recovered to mid-1.13s where it now trades. It is weaker against the likes of JPY and AUD, at 164.15 and 1.7415 respectively.

UK and EU are expected to meet over the next week or two to discuss the NI protocol, both sides suggesting there was a strong desire to reach an agreement and avoid a trade war. GBPEUR at 1.1425, pretty much in the middle of the 1.1300/1.1560 range we have seen this week. Gut feel is this could trade back toward mid-1.13s.

OPEC did announce a cut in production which led to higher oil prices. Brent which had been down to around $83.50 last week is up to almost $94.00 while WTI has seen similar moves, now $88.25 up from 76.25 last week. US said OPEC had sided with the Russians, and seems to be ready to ease sanctions on Venezuela in an effort to get access to their oil.

This morning we have BoEs DMP survey. Not one that is closely watched but does look give an idea of what businesses think inflation will look like over the coming years. ECB minutes from the recent meeting will be seen, this is where they raised 75bps, it will be interesting to see if there is any clues on future rates other than the ‘data-dependent’ message they gave at the time.

Once again running a bit behind so I’ll leave it there for now. Wouldn’t be surprised if we have another day of consolidation ahead of tomorrows US nonfarm print.

- 09.30 BoE DMP survey

- 10.00 EU retail sales

- 12.30 ECB minutes

- 13.30 US initial jobless claims

- 15.00 CAD Ivey PMI

- 16.35 BoCs Macklem speaks

- 18.00 Feds Evans, Cook speak

- 22.00 Feds Waller speaks

- 23.30 Feds Mester speaks

- 00.30 Japan household spending

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