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  • richard evans

US inflation data today, Fed to increase pace of tapering next week

Good morning

UK data this morning was certainly at the weaker end of expectations, with GDP and industrial production both missing the mark. GBP has held up reasonably well mind you, GBPUSD at 1.3215 and EURGBP 0.8545 (GBPEUR 1.1700). Some attention on the political arena, where reports suggest Boris Johnson could face a leadership challenge or confidence vote. Plan B restrictions will be voted on in Parliament today and it is possible Tory back-benchers could abstain or even vote against the proposals. Elsewhere, it is likely that France will retaliate with port blockages and legal action for UKs suggestion France will not be given all of the remaining fishing licences. UK say in order to get a licence French boats must prove previous fishing activity, which many cannot do.

USDCNY has seen some excitement over the past day or so. The pair was trading down in the mid-6.34s before a sharp rally took it to almost 6.3800. PBoC had surprised by raising the FX reserve ratio by some 2% yesterday and todays CNY fix is back just above 6.3700 having been just below 6.35 yesterday. The rate rise follows a similar move earlier this year, before this the rate had not changed since 2007. Some see the PBoC action as a signal they are not willing to see further CNY appreciation. Meanwhile Evergrande are now officially in default, according to the rating agencies.

US inflation numbers this afternoon are expected to show another rise which should cement the idea that Fed will announce a faster pace of tapering at their meeting next Wednesday. Even if the headline is not quite as high as expected, it is unlikely to see a change of feeling, particularly after recent comments from Powell and his fellow Fed officials.

USDCAD continues to push higher, from the mid-1.26s this time yesterday to 1.2715 now. Slightly hawkish comments from BoCs Gravelle yesterday did little to help CAD, he had said supply issues are likely to see keep CPI above its target range and that disruption could last longer than expected. He also suggested Omicron could lead to higher good prices. This time last week USDCAD was up in mid-1.28s and I had mentioned interest from sellers around those levels. This turned out to be the right direction, presume we have seen profit taking by now but I would expect to see sellers emerge again on an approach to those mid-1.28s.

England cricketers seem to have remembered how to play, having been bowled out for 147 in the first innings and allowing Australia to reach 425 in their first innings, England have managed a pretty reasonable 220-2 in reply. Still two days to go so we’ll have to bat a lot longer if we stand any chance at all of getting anything from the game, but at least there’s a bit of hope.

So onto the most important sports news of the week. No, not that Spurs have seen a couple of matches cancelled due to a Covid outbreak. The major news is that this Sunday my young team are in yet another cup tie, the League Cup this time, against, once again, a team in a division higher than us. We have met this team before a couple of years ago, they beat us soundly by virtue of three of their players who, at the age of 12 or so, were 6 feet tall, fast, strong and skilful. We’ve improved (and grown) a lot since then and won’t be daunted by these lads, but it’ll be another good test of how far we have come.

- 09.30 UK consumer inflation expectations

- 13.30 US CPI

- 13.30 CAD capacity utilisation

- 15.00 US Michigan sentiment survey

- 19.00 US monthly budget statement

- 20.30 CFTC positions

- Sunday

- 23.50 Japan tankan survey

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