US CPI inflation unlikely to encourage Fed rate cuts

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 London time due to the US clock changes that took place at the weekend. 

FX option expiries will be 14.00 London time, not the usual 15.00 London time.

This will be until Sunday 29^th March when we change our clocks in the UK.

No surprise that the Iranian war continues to dominate headlines, never sure exactly which headlines to believe, Trump always has a tendency to sound so positive but the Iranians are far from defeated despite the might of US and Israeli air power.  The Strait of Hormuz is still key, with talk that Iran have started laying mines to prevent shipping from getting through and even though Trump insists the Iranian Navy is battered there are still enough mine-laying boats to cause huge disruption.

Equity markets shifted lower as it became clear Trump’s message that things may be wrapped up sooner rather than later was perhaps a little too hopeful.  In currencies, GBPUSD has held above 1.3400 and EURUSD seems to find support around 1.1600, although as I type that level is coming under pressure which is helping GBPEUR push back up towards recent highs around the 1.1570 area.  GBP seems to be finding some support from the idea that BoE may not in fact cut rates next week when not so long ago a rate cut looked all but signed, sealed and delivered.  

AUD has had another push higher after RBA’s Hausers comments a couple of days ago which has led to several banks now forecasting another rate rise at the next RBA meeting in a weeks time.   AUDUSD has traded to it’s highest level for almost four years with 0.7200 a clear target, AUDNZD has broken higher and now sits at 1.2080, its highest level for 13 years, GBPAUD has dropped to two-year lows around 1.8755 and AUDJPY is in the mid-113’s which is the highest for over twenty years, or as far as my charts go back. 

Overnight we’ll have Aussie inflation expectations which could well add support to AUD.  I can’t help thinking that markets are perhaps overdoing the AUD buying, I’m not usually one to go against the trend and I’m not trying to call a top here, but if we do see further gains I may look at some cheap downside AUD plays just in case.

US CPI inflation will be the highlight today, the risks are for a softer reading but of course this is before any impact from the higher energy prices as a result of the Iranian war, as such a soft reading may not lead to the USD weakness that we’d normally expect as a Fed rate cut next week could be off the table.

Now, I suppose I do need to touch upon Spurs and their Champions league performance last night.  It made pretty horrendous viewing and I do feel sorry for the Spurs keeper who I presume will never forget his Champions League debut, having been subbed off after 15 minutes or so.  What a disaster.  If I take any positives it is that the first three goals came from slips and errors, while the fourth came from a free kick that was given despite the Atletico player making a very clear dive.  Why can’t VAR deal with that? 

Anyway, the season is going from bad to worse and although there is a small chance that Spurs could overturn the three goals deficit next week, it’s unlikely.  Focus now on the precarious domestic league position which is unlikely to improve at the weekend given Spurs are playing away to Liverpool on Sunday.  We’ll be relying on teams around us to lose points which is never a good position to be in.

In other CL action, Liverpool lost to Galatasary yesterday but will be confident of winning the return leg, while Newcastle will feel hard done by for the very soft penalty decision that gave Barcelona a 96^th minute equaliser last night.  Arsenal, Chelsea and Man City are all in CL action this evening, could be some cracking games there.

Have a great day.

-  12.30 US CPI

-  15.10 ECBs Schnabel speaks

-  00.00 AUS consumer inflation expectation

-  07.00 UK industrial production