Good morning
Both US GDP and Core PCE came in at 2.8% yesterday as had been expected. There is a risk that Q4 PCE will be higher than the Feds forecast which may explain the recent comments from Fed officials about uncertainty as to where neutral rates are. Despite this we saw gradual USD weakness through the day which pushed GBPUSD up to a high of 1.2690, EURUSD to 1.0585 and USDJPY hit 150.50, not far off some 500 points lower than this time last week. There
French stocks underperformed as PM Barnier looks to pass a budget with EUR60bn of spending cuts and tax increases. He doesn’t have the parliamentary majority needed but has said he will look to override that. His actions could bring about a confidence vote that could bring down his government. This comes after reports that Germany will breach spending limits. Meanwhile Lagarde urges Europe to negotiate with Trump on tariffs, rather than retaliate with their own.
ZAR was a notable loser yesterday, USDZAR had been down at 18.07 in the morning and as I type is trading up at 18.26, similarly GBPZAR was down at 22.78 this time yesterday and now trades around 23.10. There doesn’t seem much behind the move, even some of the bigger banks are unable to offer a suitable explanation, particularly as the move comes as manufacturing confidence actually hits a two year high.
The Mexican Peso has recovered after Trump tariff comments caused losses earlier in the week. The turnaround came after Trump posted on social media that he’d had a wonderful conversation with Mexican President Sheinbaum, proving once again how Trump can create volatility in the markets. USDMXN traded down to 20.30 from a high around 20.83.
RBNZs Silk sounded a little more on the hawkish side that RBNZ Gov Orr did recently, first confirming there was no case for a 75bps rate cut and then adding that RBNZ may introduce pauses into its rate cut cycle. A 50bps cut is still expected in February but after that it seems likely cuts will be smaller. A bit early to tell whether they will look to pause at all through 2025. NZDUSD currently 0.5890, with AUDNZD and GBPNZD at 1.1025 and 2.1475 respectively.
Russia launches more large missile and drone attacks on Ukraine, targeting its energy network. Russia do seem to be increasing attacks and are reported to be successful in taking large areas on the ground. German intelligence head has said there is a risk Russia will, at some point, attack a NATO member to see whether NATO really does regard an attack on one member as an attack on all members. He also added that Russia are already attacking the West with acts of sabotage and disrupting Western satellites. There is also a suggestion that Russia was behind the alleged cable damage cause recently when a Chinese ship dragged its anchor for 160km along the sea bed.
In sport, Liverpool put on a good show against Real Madrid yesterday, winning 2-0 in a pretty dominant display. The main action comes this evening of course as Spurs take on Ranieri’s Roma. Roma are struggling in mid-table in Seria A with three losses in a row, although whether Spurs can recreate the form we saw against Man City is very much an unknown. Fingers crossed. Meanwhile in cricket, England are played New Zealand in Christchurch, with NZ finishing the first day on 319/8.
Its pretty cold here, we had a heavy frost overnight and temperatures are still around zero. They may climb to a heady 4°c through the day but it does look like warming up heading into the weekend. Cold, but not too bad. Certainly not as bad as in the US, where an Arctic outbreak could see temperatures down to -40°c in some parts and heavy snow fall is threatened. This has affected travel plans for many over the Thanksgiving holidays.
The US holiday today and a shortened US day tomorrow could well lead to quieter markets, tomorrow does bring the latest EU inflation numbers but I’m reasonably confident we’ll see little movement for a few days. There has been years where the US Thanksgiving really spelled the end of normal markets all the way to the New Year but something tells me now is not the time to take our eyes off the ball.
Have a great day, stay warm!
- 10.00 EU consumer confidence
- 13.00 German HICP
- 17.00 ECBs Lane speaks
- 00.30 Japan Tokyo CPI
- 00.50 Japan retail trade
- 07.00 UK BoE financial stability report
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