Good morning
Softer US PPI numbers yesterday, including downward revisions to the previous month’s data, helped to send the USD lower in afternoon trade, with GBPUSD trading up from 1.3040 to 1.3090, hardly a dramatic move but perhaps more significant as it moved the pair further away from the lows seen on Wednesday after the US CPI inflation numbers.
However, after the PPI release, the US dollar came under renewed pressure overnight as the market considered, once again, the chances of a 50bps cut from the Fed next week. The move took GBPUSD as high as 1.3150 and EURUSD to 1.1090. With BoE looking unchanged for next week, ECB perhaps not set to cut in October, and Fed looking to possibly cut 50bps next week, the push higher in both GBPUSD and EURUSD does not come as such a surprise to many. The weaker USD also sent USDJPY lower, reaching 140.65. Will we see a break below 140.00 for the first time since July 2023 before the week is out?
ECB did indeed cut the deposit rate 25bps to 3.5% as had been widely expected. The central bank also lowered growth forecasts slightly, with 2024 now seen at 0.8%, 2025 and 2026 at 1.3 and 1.5% respectively. Lagarde gave little away in terms of forward rate guidance, preferring, as I’d anticipated, to decide rates on a meeting by meeting basis. Market impact was limited, reflective of just how much the moves had been priced in, it was the softer US PPI that pushed EURUSD up to the 1.1045 area. Mind you, the idea that ECB may not cut in October is doing the rounds which could offer some support to the single currency.
We saw very limited movement in GBPEUR, dipping from 1.1840 to 1.1830 initially before trading up to 1.1850, hardly worth writing about really but perhaps the limited nature of the move serves to highlight again how certain the market was of the ECB’s actions in advance.
Russia’s invasion of Ukraine looks like it could escalate as Western nations decide whether to allow their longer range weapons to be used inside Russian territory. At present they can only be used to attack Russian positions inside Ukraine. The decision could be something of a game changer for the war. Putin seems to understand this, warning that if NATO weapons are used against Russia, he would regard NATO as being at war with Russia. I don’t like where this is heading.
There were some pretty spectacular images from Elon Musk’s SpaceX as Jared Isaacman became the first non-professional astronaut to walk in space. He did fund the program so it’s only reasonable he got the main part. One of the benefits of being a billionaire I guess! The space craft, Resilience, travelled some 870 miles from earth, the furthest any human has been since the Apollo missions, when they managed some 250,000 miles.
One of the biggest rivalries in football takes place a few days from now. Yes, Man City will take on the Premier League in court charged with over one hundred cases of financial irregularities. There can be little doubt there is some guilt, although I wouldn’t be surprised to see many charges dropped on technicalities.
Oh and there’s the small matter of Spurs vs Arsenal this weekend. Can’t say I’m overly confident but it’ll be an interesting test for both teams. I’m looking for a few goals and a few bookings, I’d certainly settle for a draw.
Have a great weekend. Stay warm, it got close to 0°c overnight, the heating has gone on this morning. The forecast suggests it could warm up, I certainly hope so. I’ve been told by British Gas that my bills are going up next month. Oil prices and natural gas prices are at pretty low levels so I’m really not sure why my bills are going up.
- 09.30 UK consumer inflation expectations
- 10.00 EU industrial production
- 15.00 US Michigan sentiment survey
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