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  • richard evans

USD continues to struggles after another weaker than expected set of employment data

Good morning

A weaker US ADP employment report yesterday send USD running for cover, coming on the heels of the JOLTS job report that was also softer than expected. Slightly lower US GDP numbers also helped the weaker USD theme. GBPUSD hit a high of 1.2745, EURUSD up to 1.0945, before USD reversed some of its losses, those pairs now 1.2705 and 1.0905 respectively. This leaves GBPEUR relatively unchanged at 1.1655. These current levels feel reasonably comfortable, 1.2500 feels too low for GBPUSD, 1.3000 too high so I’m content with somewhere between the two.

Friday will bring the US nonfarm payrolls. If these follow the JOLTS and ADP in showing some cooling of the US labour markets, together with a softer GDP, surely expectations of another rate rise from the Fed must really reduce. Could we already be seeing the peak in US rates? Another positive day for US equities suggests this could well be the case. What is clear is that for a while incoming US data will be closely watched and make for potentially volatile markets. Core PCE and Chicago PMI numbers take centre stage this afternoon.

News out of China continues to indicate a slowdown there. PBoC once again fixed USDCNY below 7.2000 even though the market was trading far higher. On the subject of China, they are quietly building a presence in the UK car market. Each time I look there seems to be another Chinese electric vehicle brand being launched. We have had MG, I saw this morning an electric pick- up truck on offer called Maxus, made by state-owned SAIC, which actually used to be Leyland DAF. On holiday I saw my first ‘Lynk’, which comes from Geely, the firm that took over Volvo, while Polestar cars also come from Volvo/Geely. Great Wall Motors (GWM) is offering the Ora in the UK.

However the one that has really caught my eye is Lotus. We all know the brand, indeed it was their Elise that marked the foundation for Musks first Tesla roadster. Now China owned, again under Geely I believe, they have some models coming out called Eletre, an SUV, Emira, a sports car and a mad hypercar called Evija. I happened to be walking past their showroom on Piccadilly recently and stopped to take a look. They seem very well priced (well, sub-£100k) and really are quite striking. Whether they are any good remains to be seen but if I was in the market for all all-electric SUV I’d certainly consider the Eletre.

Back to the currency world and this morning brings the EU inflation numbers. The YoY numbers, both headline and core, are expected to be lower at 5.1% and 5.3% respectively, the lowest readings since the start of 2022, which could well be enough to persuade ECB to keep rates on hold in September. They have raised rates so far at nine meetings in a row, with 4.25% of rate rise to takes rates to 3.75%. As with the Fed, it is possible we are seeing a peak in rates. ECB minutes from the last meeting are also released today which could give an insight into current thinking. All this could push Euro around particularly if those inflation headline numbers are significantly away from expectations, either way.

Have a great day….

- 10.00 EU HICP

- 12.30 ECB minutes

- 13.30 US core PCE, personal income, spending, initial jobless claims

- 14.00 Feds Collins speaks

- 14.45 US Chicago PMI

- 17.00 ECBs de Guindos speaks

- 02.45 China caixin manufacturing PMI

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