UK GDP down but not out

Good morning

Yesterday’s US CPI did little to upset the markets, coming in bank in line with expectations.  The US dollar did weaken a little as market pricing for a Fed rate rise in Sept slipped, GBPUSD saw a high of 1.3540, EURUSD hit 1.1560 and USDJPY dipped below 159 to 158.65.  The USD weakness didn’t last long, GBPUSD and EURUSD dropped to their morning levels around 1.3500 and 1.1545, while USDJPY ticked back up to 159.15 and this morning that spell of mild USD strength has continued with GBP and EUR now 1.3475 and 1.1515 against USD, and USDJPY up to 159.40.

Trump was on the wires again yesterday sharing his views on Iran, saying the US has full control of the Strait of Hormuz, and that Iran has no Air Force or Navy, soldiers are not being paid, the country has run out of money and they are facing an inflation rate of around 300%. Iran meanwhile have said the Strait of Hormuz is blocked and will remain closed.  I do not doubt Iran’s Navy and Air Force are decimated but they seem to have a supply of drones and missiles on hand should they be needed.  Iran are not giving up that easily.  Oil prices remain around August highs at $83 and $89 for WTI and Brent respectively.

UK initial GDP estimates released earlier this morning showed a Q2 expansion of 0.4% as has been expected, a number that sounds horrifically low but seems to have been met with some relief, despite being lower than Q1 GDP of 0.6%.  There is some thinking that decent weather and the world cup helped June numbers which saw an increase of 0.3% against an expectation of 0%.  Industrial production numbers released at the same time were disappointing, coming in at -0.2% with a revision lower of previous data as well. 

NZD has softened again overnight, coming after the release of the latest RBNZ inflation expectations which came in at 2.34%, lower than the previous 2.53%.  GBPNZD rallied 100 pips or so to 2.3145, remember this pair was in the mid-2.28’s at the start of the week.  AUDNZD pushed up to 1.2100, 150 pips off the week lows.  Markets still price some 85bps of tightening over the next year.

In other news, I have to admit I found the eclipse yesterday mildly underwhelming.  With the correct glasses on of course, we watched as the moon moved across the sun, but it didn’t get quite as dark as I thought it would, perhaps showing the power of the sun. The fact it came later in the evening also meant that we didn’t see a marked increase in daylight after the event.  Still, it was interesting to see and I must admit I’d love to go somewhere one day where it really goes 100%. 

In contrast, the Perseid meteor shower was pretty spectacular.  I didn’t see anywhere near the 150 or so promised each hour but in an hour or so saw several streaks of light across the night sky which is always an impressive sight. 

To A levels, and by now results will be out.  I hope everyone got everything they wanted, and that they can now relax for a few weeks before moving on with whatever the next stage in their life will be. 

US PPI the main event on the calendar today but unless it is far from expectations I doubt we’ll see much in the way of market impact.  Still, I’m likely to be glued to my desk today as its going to be 36°c here which is hot enough to keep me from wanting to spend too much time outside.  We’ll be back in the mid-20’s by the weekend.  If there is somewhere that it was permanently in that region I’d have to think very seriously about moving.

Have a great day…

-  10.00 EU industrial production

-  13.15 Feds Hammack speaks

-  13.30 US PPI, initial jobless claims

-  13.40 Feds Barkin speaks

-  23.30 NZ business PMI

-  00.30 RBAs Bullock speaks