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USD move opens up EURUSD parity talk again

Good morning

What a day! I remember an old saying that I used to hear doing the rounds in dealing rooms many years ago, ‘buy dollars, wear diamonds’. The move started as I was writing my morning report yesterday, EURUSD was around 1.0440, a couple of hours later it was below 1.0300 and went on to trade to 1.0240. GBPUSD followed a similar path, moving from 1.2120 to eventually reach 1.1900. Currently trade 1.0255 and 1.1965 respectively. That talk a while back of parity in EURUSD doesn’t seem so unlikely now. Peace in Ukraine is the only event I can see that might turn fortunes of the Euro although unfortunately this seems unlikely at the moment

It is still a little unclear what triggered the moves, although Europe’s energy crisis, potential Germany slowdown, general USD support on central bank divergence and a break of key technical levels are all factors. The move in Euro came a little before the pounds decline, which for a while saw EURGBP down to 0.8545 (GBPEUR 1.1700) but with a political mess in the UK GBP couldn’t hold those gains, slipping back before settling around the 0.8585 (1.1650) area.

With the high profile resignations of Sunak and Javid who both said they have lost confidence in the PM, Boris Johnson is really struggling to keep a grip on power. Another MP, Will Quince who just a couple of days ago had defended the PM, has also quit. Its getting a bit daft now. He has never seemed open to the idea of resigning but there must surely come a point where there is such little support it is just impossible to stay at the helm. As we know, Johnson doesn’t see things as most people see them. The odds suggest Johnson will not be in power at the Tory party conference in October.

Covid numbers continue to rise. It wasn’t that long ago that I said for the first time in a long while, I didn’t know anyone with Covid. Not the case now, OK we’re not talking huge numbers, nor are we talking serious illness, but there’s no doubt it’s making a comeback. I’ve not had a vaccine booster for a while, will we see another rollout at some point ahead of winter I wonder? Elsewhere, Shanghai could be facing another lockdown as mass testing recently detected enough cases to put their zero Covid policy at risk again.

So what are we looking forward to today? EU retail sales and the EC’s growth forecasts are on offer this morning, along with a couple of BoE speakers. FOMC minutes later, surely have to be on the more hawkish side with growing inflation concerns that saw a 75bps rate rise. The minutes are obviously a little behind the times, there has been a little more focus on potential slowdowns since the last meeting, could these minutes reiterate the hawkish Fed stance but could also feel somewhat outdated.

Finally, in sport, England beat India in the test match with a rather stunning victory after a 378-run chase, hot on the heels of their recent wins over New Zealand. Not only have England won but they seem to have managed to turn test cricket back into something worth watching. Wimbledon continues, with UK’s Norrie through to the semi-finals where he faces Djokovic. And the womens Euros begin today with hosts England facing Austria this evening.

- 09.10 BoEs Pill speaks

- 10.00 EU retail sales, economic growth forecasts

- 13.30 BoEs Cunliffe speaks

- 14.00 Feds Williams speaks

- 14.45 US S&P services PMI

- 15.00 US services ISM, JOLTS job openings

- 19.00 FOMC minutes

- 02.30 AUS trade balance

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