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US dollar continues its show of strength, GBP struggles

Good morning


A stronger than expected US ISM figure helped push the US dollar higher against other majors.  GBPUSD finally broke out of that 1.26-1.28 range that we’d been stuck in for a while now, trading as low as 1.2520 after the release before slowly working its way back to current levels around 1.2555.  EURUSD suffered a similar fate, trading down to 1.0725, now 1.0755.  Losses were not as great in EURUSD as GBPUSD which left GBPEUR 50 pips lower, now around 1.1675. 


Perhaps GBP’s fall could be in part due to BoEs Pill who spoke yesterday of the potential for rate cuts this year, although he did make it clear they wouldn’t be happening in the near future.  He mentioned rate cuts would be a reward for a drop in inflation.  These comments are really very similar to most central bankers at the moment…inflation is slowly dropping, lower rates are possible but its just a little early for the time being.


USDJPY is up at 148.60, joust 20 pips or so short of the area that has capped the upside since late Nov 2023.  This yen weakness comes despite suggestions that BoJ could well be looking to move away from their ultra-loose monetary policy and negative interest rates as early as April. 


AUS pushed higher after RBA left rate unchanged but gave a more hawkish tone than many had expected.  They mentioned that it is likely to be some time before they are satisfied that inflation can be sustainable in the target range and still see risks to inflation on the upside, as such they are not yet ruling out further rate rises.  They did however lower their longer term inflation forecasts.  GBPAUD traded down from 1.9345 to mid-1.92’s, but has since traded back up to 1.9300. 


In other news, headlines are dominated by the announcement that King Charles is being treated for cancer.  There are reports that Harry will be flying in from his Los Angeles home to visit Charles, not bad timing on his part given the atrocious weather California is seeing right now.  Exceptionally heavy rain and strong winds are leading to floods and landslides, with several fatalities already reported. 


Man City are now up to second in the premier league table after beating Brentford yesterday evening.  They have a game in hand over current leaders Liverpool and do seem to back to firing on all cylinders after a wobble not so long ago.  Just two points separate the top three at the moment. 


That’s all for the time being, a fairly short report today.  I’m sure some readers will be grateful!


-  10.00 EU retail sales

-  15.00 CAD Ivey PMI

-  17.00 Feds Mester speaks

-  17.45 BoCs Macklem speaks

-  21.45 NZ unemployment


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