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  • richard evans

USD lower as US data disappoints again

Good morning

 

Another weaker than expected US PMI number yesterday sent USD lower once again, GBPUSD reached 1.2735 and despite a pullback to 1.2690 overnight we are now 1.2725.  EURUSD hit 1.0875, did drop overnight as well but is now back up to 1.0870.  GBPEUR now 1.1705.

 

Some bigger moves to report as well, USDJPY spent much of the day in the mid-150s but drifted back towards 150.00 and this morning the pair slumped to 149.35, helped in part by that weaker US dollar together with some rather hawkish talk from MUFG’s Seki who sees a possible rate rise this month and another rate rise later in the year which if correct could see JPY rates at 0.25% by year end. 

 

Bitcoin had an interesting day yesterday, trading above $69,150 at one stage before collapsing to around the $60,000 area, at one stage perhaps trading as low as $59,500 or so.  As ever with Bitcoin it is difficult to tell what caused the drop, although there is talk it was a large sell order of positions held since 2010, when it probably cost just a few cents.  It has done well to recover and now sits back up at $67,250.   Gold meanwhile continues to find support, currently $2126/oz, the talk of an attempted Houthi attach on two US warships probably cementing the idea of holding gold as a safe haven. 

 

The weaker US dollar hasn’t been helped by IMFs report on the banking sector which concentrated on the US$ trillion exposure to commercial real estate which could spell trouble for small regional banks.

 

Overnight Aussie GDP came in a touch softer than expected although at least showing growth as it has done now for nine consecutive quarters.  RBNZs chief economist said RBNZ could cut rates sooner than expected if Fed cuts rates first, suggesting that their own policy requirements are impacted more by US than what is required domestically.  GBPNZD traded just above 2.09 overnight before dipping to 2.0835, now 2.0865.   

 

It’s a pretty busy calendar today.  We hear from Powell today at his congressional testimony.  He is scheduled to speak at 3pm london time but the text of the speech is usually released a couple of hours earlier.  With the market now in line with the Feds forecast of three rate cuts this year I think Powell will be content with keeping the usual theme we have become used to.  US job numbers in the form of ADP and JOLTS will be out as well, and Powell is followed by several other Fed officials.  BoC are expected to keep rates unchanged at 5% this afternoon. 

 

In the UK, attention will be on the UK budget just after midday, a cut in NI rates has been widely talked about, as you know I think he’d be better off keeping it as is and getting some much need money in the countries coffers.  There is unlikely to be any significant changes in public spending although I did read that councils may be asked to limit spending on diversity.  Whatever Hunt comes out with i doubt it will have any significant bearing on the general election later this year, even a surprise cut in income tax would hardly encourage voters back to the Tories.  Fortunately we are highly unlikely to see any of the nonsense from the mini-budget in late 2022, but the market will be looking as to whether Hunt sticks to a sensible fiscal framework.

 

Looks like another dry day here but I’ve just looked at the forecast for the next couple of weeks and it looks like we could be in for a load more rain.  Oh joy.  Still, the evenings are getting noticeably lighter.

 

Could be a busy day so get the admin out of the way early. 

 

-  10.00 EU retail sales

-  12.30 UK budget

-  13.15 US ADP employment

-  14.45 BoC rate announcement

-  15.00 US JOLTS job openings

-  15.00 CAD Ivey PMI

-  15.00 Feds Powell speaks

-  15.30 BoC press conference

-  15.00 Feds Daly speaks

-  19.00 Fed Beige book

-  21.15 Feds Kashkari speaks

-  00.30 AUS trade balance

-  03.00 China trade balance

 

 

 

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