Good morning
Yesterday saw a little positivity creep into the markets, FTSE 100 leading the way with a near 1% rise and most Asian markets followed suit. Futures prices this morning suggest more gains. US dollar did weaken a little yesterday as you’d expect with better risk sentiment but it didn’t last long. GBPUSD had been around 1.2100 yesterday before trading up to 1.2160 but struggled to hold those gains and slipped back to that 1.2100 area. As I type is now, an as yet unexplained bout of US dollar strength has sent the pair down to 1.2075. Similarly, EURUSD was up to 1.0460 yesterday but has slipped back to 1.0380 this morning. EUR not helped by de Guindos who said ECB would raise rates 25bps in July, not 50bps.
We do get the BoEs financial stability report this morning, it does come with a press conference so worth watching for any comments, particularly with regard to high interest rates and a slowing economy. Tenreyro speaks later today, she is in the more dovish camp although has voted for the most recent rate rises.
We had the BoCs business survey yesterday, CAD relatively unmoved on that although it did push a little higher as rate rise expectation from the 13th July meeting goes nearer 75bps from 50bps on talk of record inflation. Those CAD gains have been wiped out by this mornings stronger US dollar, taking the pair back to 1.2875.
China VP Liu spoke with Yellen, seeking not only the lifting of tariffs but also some sanctions on Chinese firms. US are still looking at removing some tariffs on goods from China, this could be announced this week, but this is more an effort to tackle inflation, and those tariffs could be replaced with tariffs in other areas.
RBA did raise rates 50bps to 1.35%, but AUD dropped from its pre-announcement levels on the release, AUDUSD now 0.6835, AUDNZD 1.1040 and GBPAUD just a few pips away from 1.7700. RBA said they would continue to normalise policy and are committed to bringing inflation back to target. They see inflation peaking this year before falling back to 2-3% next year.
Putin has reportedly told his military to carry on their invasion further into Ukraine having taken control of the key Luhansk. Something tells me he isn’t going to stop in the East. Whether arms from the West is enough to halt the Russian onslaught remains to be seen but at the moment it seems Russia are interested in destroying the majority of Ukraine. With Russias energy supplies limited, the last thing we need is further reductions in supply. Step up Norways oil and gas workers who have decided to go on strike. Not sure why, I guess they don’t feel they are getting a fair share of the huge income the higher energy prices generate.
Welcome back to our friends in the US after their independence day celebrations, although I’m sorry to see reports of yet another random shooting resulting in six fatalities. BBC say there has been one mass shooting in the US every week of 2022. I’m really not sure what can be done, gun ownership is a touchu subject out there and I would imagine even if guns were banned there are so many of them in circulation that it would be nigh on impossible to stop someone having access to one.
- 09.00 EU S&P services, composite PMI
- 09.30 UK S&P services, composite PMI
- 10.30 UK BoE Financial stability report
- 13.30 CAD building permits
- 17.30 BoEs Tenreyro speaks