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  • richard evans

TRY a little harder

Good morning

At this time of year I always wonder whether I’ll fine anything of interest to write about. Ok I can be as doomy and gloomy as the best of them when it comes to Covid but its currency news I’m looking for mostly.

EURUSD and GBPUSD have seen a bit of volatility over the past month but have really remained roughly between 1.1250-1.1350 and 1.3200-1.3350 for much of this time, despite FOMC tapering and BoE rate rises. So where do we turn for a bit of real movement.

Enter USDTRY. I’ve mentioned it a few times recently as it has marched steadily higher after CBRT rate cuts and Erdogan comments. Yesterday USDTRY reached 18.20, seemingly on its way to 20.00, before turning sharply to trade to 14.50, then 13.45, reaching as low as 11.15 overnight before returning to 13.60, where we currently sit. That’s volatility. Too much in fact but it certainly makes for some interesting charts. The move was triggered as Erdogan introduced measures to deter demand for foreign currency and protect savers from TRY depreciation. What isn’t clear is how they will actually pay for the measures they introduce.

Elsewhere, Russia are demanding answers to their lists of demands over NATO and its operations in Eastern European countries. They may be disappointed, there is no way Russia will be allowed to openly determine who may or may not be a member of NATO and certainly should not be able to threaten its neighbours with invasion. However NATO, powerful as it may be, will have no interest in fighting a war over Ukraine should Russia invade. Will sanctions be enough of a tool to deter Russia?

RBA minutes showed they are still happy to remain patient saying the economic risks posed by Omicron will be more apparent by the time the Feb meeting comes around. They see no interest rate rise until inflation is at 2-3% and will continue to offer monetary easing, with tapering of QE set to end in May 2022. Worth noting that RBA do say that they look at other central bank action rather than just inflation and employment, well BoE have already raised rates and by the time Feb comes around Fed will be nearly finished on tapering. Could this made RBA a little more hawkish? Lets see what Omicron brings.

On the subject of Omicron, a further 92,000 Covid cases were reported in the UK yesterday. Not everyone agrees but I still think it is almost impossible to avoid restrictions post-Christmas. There has been a degree of self-policing with parties cancelled and many people generally just less inclined to mix in large groups in order to protect themselves for Christmas. New Years Eve is another issue altogether though. Case numbers in early to mid-Jan are likely to explode. I’ve been lucky enough to secure some tickets for the Watford/Spurs match on New Years Day. Restrictions may begin on the 2nd Jan……

- 13.30 CAD retail sales

- 15.00 EU consumer confidence

- 23.50 BoJ minutes

- 07.00 UK GDP

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