Good morning
A softer than expected US PPI number yesterday sent USD lower with GBPUSD trading up to 1.2835 and EURUSD to 1.0960. Gains against the US dollar were pretty evenly matched, with GBPEUR holding within a few pips of the around the 1.1710 level after the shift higher following yesterdays UK employment data. The softer US dollar has helped Yen push higher, an interesting sell-off in USDJPY in the early hours of this morning saw the pair trade to the low-146s, but has since recovered to 147.05. The move seems to have been triggered by Japan PM Kishida’s surprise announcement that he will not be standing in the September elections.
This morning UK inflation came in at 2.2%, core at 3.3%, both a touch higher than last month but lower than most expectations. GBP has fallen back a little, GBPUSD moving from 1.2860 to 1.2825, GBPEUR down from 1.1700 to 1.1670.
EUR has had a little support after German wage agreements look set to be on the high side, damaging chances of another ECB rate cut. So far 1.1000 has capped the upside for EURUSD. We have the latest EU GDP release later this morning, markets looking for an unchanged y/y number of 0.6%.
A rate cut by RBNZ this morning took markets by surprise. They cut 25bps to 5.25% but did announce they had mulled a 50bps cut, before deciding on the smaller cut, a sign they are in a good position to move calmly. They did mention that they are more confident on inflation and noted the economy is contracting faster than expected, and since their last meeting the balance of risks has certainly shifted to the downside. NZD lost ground as you’d expect, GBPNZD moved from 2.1165 to 2.1420, now 2.1350, AUDNZD rose from 1.0925 to 1.1035, while NZDUSD fell from 0.6075 to within a few pips of 0.6000. RBNZ Gov Orr will be speaking again this evening.
Elsewhere, Ukraine’s surprise offensive into Russia continues leading to the evacuation of Russian citizens from the area. It is difficult to see what the long-term objectives are here for the Ukrainians, although the news that Russia may be withdrawing troops from Ukraine to ward off the attack could be reason enough. A very brave move by the Ukrainian soldiers.
It was another very pleasant day yesterday but today we’ve already had a bit of rain, and more is expected through the day, with temperatures forecast to be in the low 20’s for the next week or two. That’s a bit disappointing for the time of year but is actually quite bearable, indeed I’d settle for that for most of the time.
The latest US CPI inflation report is the main event today, both the headline and the core readings are expected to drop around 0.1% to 2.9% and 3.2% respectively. There is some thinking we could see a lower number after yesterdays softer PPI release although I haven’t seem much correlation between US CPI and PPI recently. As always, there is potential for market movement if CPI comes out away from expectations.
Overnight we’ll get the latest Aussie consumer inflation expectations and employment data, both have market moving potential but it is difficult to get a gauge of feeling for this. The unemployment rate is expected to stay at 4.1%, while overall employment is hoped to see an increase of around 26,000 which, while lower than last months +50k would still be in positive territory. As I recall, a lot depends on whether this comes from full or part-time employment. We’ll know more by this time tomorrow. GBPAUD currently 1.9335, AUDNZD 1.1035 and AUDUSD 0.6635.
Early tomorrow morning we’ll have the first print for UK Q2 GDP. While June itself is not expected to show much, if any, growth (0.0-0.1%) the quarter should still be close to Q1’s 0.7%, perhaps a touch lower, leading to an annual rate just short of 1%. Not exactly storming numbers but would certainly be an improvement on Q4 2023 and show some decent prospect for the remainder of 2024.
Finally, not sure if you saw the BBC programme last night where Freddie Flintoff takes a team of novice cricketers to India. It is the team he had set up a couple of years ago, this was the follow-up. It was during the filming of this that Flintoff had the car accident while filing Top Gear. There was some footage of Flintoff talking a while after the accident which gave an small insight into the scale of his injuries, and the difficulties he faced in his recovery.
I cannot help but think that the young lads he had been helping had actually in turn helped him, giving Flintoff reason to get back to work. The trip to India was delayed but they did get there, and Flintoff’s demeanour was certainly more relaxed whenever anything cricket-related was on offer. He’s been through quite a lot, that’s for sure.
Have a great day
- 10.00 EU GDP, employment, industrial production
- 13.30 US CPI
- 19.00 RBNZ Gov Orr speaks
- 00.50 Japan GDP
- 02.00 AUS consumer inflation expectation
- 02.30 AUS unemployment
- 03.00 China retail sales
- 07.00 UK GDP, industrial/manufacturing production
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