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USD makes small gains as Fed officials continue to talk down chances of early rate cuts

Good morning

It was a slower day in the currency world yesterday with little in the way of significant movement. US dollar has pushed a little higher, this time it was Feds Harker who pushed back on the idea of early rate cuts, saying there is no rush to do so. He did add that he saw no reason to raise rates above current levels and that although the US economy is resilient, there are signs it is starting to slow and a soft landing is still not a given.

The mildly stronger US dollar had pushed EURUSD down to 1.0930 and GBPUSD to 1.2625, both are a few pips off those lows as I write, with GBP lower yet again versus the single currency, GBPEUR now 1.1535.

While US Dollar was higher against most majors, it failed to push Yen higher. USDJPY actually traded to a low of 142.80 as Japan raised their 2024 inflation forecast from 1.9% to 2.5%, also raising GDP estimates to 1.6% from the 1.3% level they suggested six months ago. This more upbeat view has helped Yen hold most of its gains although we are well off the lows as I type, USDJPY now 143.20. We will have Japan inflation numbers released overnight and also see the minutes from the last BoJ meeting. You’ll remember that I was thinking BoJ would have been more hawkish at that meeting, these minutes may give us a little more insight into their thinking and of course any clues as to when a possible move away from negative rates could be seen,

We have the Turkish interest rate announcement this morning, a 2.,5% rise is expected which would take rates to 42.5%. Ouch. Those high rates are still not helping TRY, with USDTRY now up at 29.15.

The highlight of todays calendar is likely to be US GDP although at the same time we have a host of other US data so 1.30pm could be a busy time. Other than that we have CAD retail sales. UK GDP and retail sales will be out early tomorrow morning, as you know I’m a bit worried about the retail sales figure after many retailers seem to have introduced sales earlier than I’d normally expect.

In other news, a new Covid sub-variant, JN.1, is being monitored by WHO. The US CDC says the new variant is already responsible for some 20% of Covid cases in America and it’s growing fast. WHO have said that current vaccines will continue to work, they also say the variant has generally mild symptoms although as with most illnesses, there can be more serious symptoms. With many parties and family gatherings at this time of year it would not be a surprise to see a spike in infections in early 2024. Mind you there is a lot of nasty stuff already going around, I bet we all know people who have suffered from sore throats and terrible coughs over the past couple of months.

There is some talk of serious negotiations for another ceasefire in Gaza although both sides are far apart with their demands. Hamas says remaining hostages will only be released on a permanent ceasefire, while Israel rejects the idea of a permanent ceasefire as they continue to try to take Hamas apart. Israel claims it has found a network of tunnels used by Hamas leaders. Not sure we’ll ever get the full details but the tunnels in Gaza sound like an incredible feat of engineering.

That’s all from me. Still not time to sit back and relax but I guess I shouldn’t complain!

- 11.00 CBRT rate announcement

- 13.30 US GDP, core PCE, philly fed survey, Core PCE, initial jobless claims

- 13.30 CAD retail sales

- 23.30 Japan CPI

- 23.50 BoJ minutes

- 07.00 UK GDP, retail sales

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