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USD continues lower but markets price US rates higher for longer

Good morning

Welcome back after the weekend, a long weekend for some readers and just a normal winters weekend for others. We headed up to the peak district just for a night, it’s a very lovely place indeed, it was cold but it was dry, possibly like most areas, only saw rain when we were half way home. Stayed in Buxton which is pleasant enough,, but some of the scenery around Castleton is spectacular.

The weather is looking pretty miserable right now but I do have to remind myself that is December later this week so a bit of cold and rain is only reasonable. Potential for some sleet later in the week and by next weekend it looks like it’ll be getting really cold overnight.

The US dollar weakened again late last week and that move has held so far this morning with GBPUSD trading a high around 1.2620. EURUSD is up as well, but only as far as 1.0950, which means GBPEUR is holding above 1.1500, currently 1.1525. USDJPY is just around the 149.00 area having failed to get above 149.70 a few times last week.

Its quite a busy week calendar-wise, not so much today but looking further ahead we will have a load of central bank officials speaking tomorrow, RBNZ rate announcement in the early hours of Wednesday morning, German inflation and US GDP on Wednesday, EU inflation and US PCE Thursday, with US SIM PMIs Friday. There is no nonfarms payrolls Friday despite it being the first Friday of the month, we will have to wait until 8th Dec for that. Still, there’s enough to keep us busy in the meantime.

I’ve seen a few banks looking at US rates and it appears the market is not currently pricing enough in the way of rate cuts for them. As you may recall, a few banks were looking at several rate cuts through 2024, these don’t seem to be priced in. ECB officials have been saying they are able to pause rate rises in order to see the effects of previous tightening and are happy to remain neutral for now. Lagarde speaks today, I’ll be surprised if she says anything to contradict this message. A similar message from the UK, although out of Fed, ECB and BoE it is the latter that still seems to have a greater chance of being forced into rate rises.

UK’s House of Lords are looking to reform BoE role after the failures they see in the inflation fight. RBA are also going to be given a thorough overhaul, while the Aussie government popularity has hit its lowest level since its election 18 months ago, while the incoming NZ government have upset many by announcing plans to scrap the smoking ban for young people. Meanwhile, Geert Wilders has said he may soften some of his manifesto points in order to create a decent government.

Good news over the weekend that the pause in fighting in Gaza has held for now and many hostages have been released although there is still a long way to go. Pretty shocking to see how many young children were taken by Hamas but I have to admit to being surprised how many Palestinians the Israelis are holding, some of them for rather petty crimes. To the outsider it looks simple to just say ‘live and get on with each other while expecting each others own rights’ but of course the reality is this seems a nigh on impossible solution.

Russia have reminded us that they are still willing to tackle Ukraine by launching the largest drone attack yet, targeting some areas in Kyiv. As with Gaza, this will be going on for a long time unfortunately unless Ukraine give up large areas of their lands that the Russians have taken. Whether that would even be enough for Putin, or whether he is intent on taking over all of Ukraine remains to be seen.

The COP287 climate summit is due to start this week in UAE. For those not familiar with the event, it is where people fly in on private jets to decide how to tell us ‘normal folk’ we should reduce our use of aeroplane travel and the like. This year it is in UAE, leaked documents show that UAE were using the gathering as an opportunity to strike oil and gas deals. Not exactly the idea of climate talks.

Having been out and about for much of the weekend I missed the Spurs match which is no bad thing, I had warned that Spurs will be nowhere near their early-season levels with many key players out. That’s not a whinge, all clubs go through this from time to time and Spurs haven’t been helped with some reckless suspensions but it doesn’t help when one player literally just back from injury had to be substituted early in the match following a bad tackle on him by an opposition player. Elsewhere, F1 season is over with Verstappen and Red Bull more dominant than ever before. The other teams are so far behind it will take something of a miracle for them to be competitive next year. Or a rule change perhaps, that usually does the job!

And finally, just a mention for Terry ‘El Tel’ Venables who passed away over the weekend following a long illness. Not many people in football achieved what he has and had so many people look up to him. He is probably remembered most for coaching Englands Euro 1996 team but his achievements went well beyond that, not least that he is the only player to have been capped by England at every level from schoolboy to full international level. He is one of those who left a really positive impact on so many people.

- 14.00 ECBs Lagarde speaks

- 15.00 US new home sales

- 00.30 AUS retail sales

- 03.20 RBAs Bullock speaks

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