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  • richard evans

The calm didn't last long!

Good morning

GBP is a key loser as risk sentiment sours again and USD pushes higher as US inflation numbers yesterday beat expectations to the upside and Fed officials talk of rates hitting 3.5% this year. Weaker than expected UK data this morning, GDP, industrial production, trade balance all missed forecasts, putting more pressure on an already struggling currency. The threat of the UK unilaterally rescinding the Northern Ireland protocol also helping pile the pressure on. GBPUSD has traded down to 1.2185, currently just above 1.2200. The possibility of seeing 1.2000 is getting greater and we are seeing interest now in short to medium term downside GBP trades targeting that 1.20 region. Plenty of sellers of GBPUSD lined up on a rally, should we see one.

EURUSD had been holding up at first but as I type is trading down to 1.0450. Further losses seem likely here too, despite noises from ECB officials that rates will not be negative by the end of the year. EUR had looked as though it would fare better against GBP, EURGBP was up at 0.8615 (GBPEUR 1.1605) earlier, the lowest levels since late Sept/early Oct 2021, but this latest EUR sell off has taken GBP off those lows, EURGBP currently 0.8570 (1.1670).

USDCNY fixed at 6.7292 but has traded up to 6.7700 amid talk of possible rate cuts. AUD and NZD lost ground as well against USD, although probably fair to say not many currencies haven’t. JPY one of the few, with USDJPY down to 128.90, I’d mentioned possible downside in USDJPY just yesterday when we were above 130.00 but didn’t expect it to come so soon. Is it returning as a safe haven? Elsewhere in Asia Hong Kong has been buying vast amounts of HKD to defend the currency peg, opening more talk of a possible move in the peg. I’d mentioned this potential recently.

Bitcoin worth a mention as well, currently trading down at $26,000 having spent most of April up near $40,000 and even being up at $30,000 overnight. Guess money in Bitcoin is now needed for other things. I am late to the party of course but wouldn’t be surprised to see it falling quite a lot further as people scramble to keep ‘real money’.

Gold is just below $1850/oz, up from $1835 or so yesterday. It is doing a good job to hold up despite USD strength, for now at least. Gold used to be regarded as a decent hedge against inflation but if that were still the case surely it would be higher today.

Finally i see North Korea are locking down as they report an outbreak in Pyongyang but don’t mention the actual number of cases. There have always been doubts about their previous claims that they had no cases before but the thinking now is that this outbreak must be pretty bad if they are going public on it. Whether North Korea accept help from the outside remains in doubt though.

Crikey, not a particularly cheery report this morning, sorry about that. All we need now is for Arsenal to beat Spurs later today to really add to the doom and gloom.

- 13.30 US initial jobless claims, PPI

- 16.35 BoCs Gravelle speaks

- 23.30 NZ business PMI

- 03.00 RBAs Bullock speaks

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