Good morning
Apologies if this arrives late, had some internet issues this morning.
Yesterday we had both UK and US rate announcements. BoE did indeed cut rates 25bps to 4.75% in an 8-1 vote, only Mann dissented in the end. If one word summed up the BoE it would be ‘gradual’, with Bailey making it clear this would be the best way to proceed given the inflation outlook and the post-budget uncertainty, although lower inflation and lower rates are still expected. Many looking for quarterly rate moves from BoE from now on. GBP did find support over the announcement, pushing higher against most majors. GBPUSD traded up to 1.3000 through the day, GBPEUR reached 1.2025 although GBP gains were outweighed by further gains in AUD which took GBPAUD down to 1.9450.
After the London close, the FOMC did cut rates 25bps as had been widely expected, their rates now also 4.75%. The move was priced in to such an extent that we say little movement initially, Powell spoke but didn’t really offer anything new, confirming the Fed remain focussed on their dual mandate of inflation and jobs. He did say that the Fed were on path to neutral rates. The market still looks for a rate cut in December, particularly if November jobs data is on the weaker side, indeed a Dec cut could be 50bps if the data warrants it. We also have two US CPI releases before that meeting, the first coming just next week. Powell did say the election result would have no short-term effect on policy and made it clear that he would not leave even if asked by Trump.
Since the Fed announcement we’ve seen a little USD upside, GBPUSD now 1.2960, EURUSD 1.0780 and therefore GBPEUR still around 1.2020. uk’S Telegraph reports BoE as saying that Reeves budget, with higher public spending and higher cost of employment can only serve to push up prices. The market seems to be overlooking the recent German government implosion, with Scholz under pressure to bring forward the confidence vote from January to next week. USDJPY is actually lower at 152.55, some 200 pips down from yesterdays high.
So, after a couple of weeks with plenty of event risk, the reality is that we’ve had a range in GBPUSD of 1.2850-1.3050 for almost three weeks and we are now bang in the middle of those two extremes as I type. I’d warned we may see some volatility, indeed we have had some sharp swings, but if we’d gone away for a couple of weeks and returned today we wouldn’t notice much in the way of change at all.
CAD unemployment is a pretty key release today given the BoC’s policy path has been closely aligned with labour market weakness recently. A weak set of numbers today will only serve to cement the idea that we’ll see further cuts from BoC.
In sport, a disappointing night for Spurs, losing 3-2 to Galatasary, but other English clubs performed better, Man Utd overcame PAOK 2-0, while Chelsea just about scraped past Noah with an 8-0 victory. Chelsea are firm favourites to win the competition. Spurs are back in action this Sunday against Ipswich, but the highlight of the weekend matches must surely be Chelsea v Arsenal.
In rugby, Ireland take on the All-Blacks this evening while tomorrow afternoon England will be hoping for a return to winning form in their match against Australia.
Have a great weekend as and when it comes. It looks like this spell of dry weather will continue, which means I’ll be back outside collecting yet another carpet of leaves that has fallen but there are still plenty more left on the trees still to come down. Oh joy!
- 10.45 ECBs Cipollone speaks
- 12.15 BoEs Pill speaks
- 13.30 CAD unemployment
- 15.00 US Michigan sentiment survey
- 17.00 Feds Bowman speaks
- 20.30 Feds Musalem speaks
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