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  • richard evans

USD rally continues ahead of Jackson Hole

Good morning

The dollar marches on, with EURUSD trading down to almost 0.9900 and GBPUSD slipping to 1.1720, although the latter has crept up to 1.1745 bringing GBEPUR back up to 1.1850 having traded down to 1.1750 late last week. Attention still firmly fixed on Powells speech at Jackson Hole later in the week, the market clearly thinking he will remain on the hawkish side. His colleague Kashkari, usually dovish, has said he is against the idea of rate cuts next year, adding to the notion that Fed will keep rates highers and longer than current thinking. Equities are under pressure, he major US indices closed 2-2.5% lower, Asian markets also saw losses, and futures prices suggest a lower opening for European markets.

The move lower in EURUSD is perhaps of more interest, particularly the way it broke through parity and then the July 2022 lows, somehow it has just held above 0.9900 but further losses look likely. Bundesbank have said a recession in Germany looks more likely and inflation could reach 10% there, and who knows what will happen with gas supplies to Europe in the coming months, even though Germany insists it has alternatives suppliers to Russia. We will be watching todays PMI releases carefully but imagine and rally in EURUSD will likely be sold into.

Meanwhile, CITI have said UK inflation could reach 18% early next year, which with a slowing economy and rising rates doesn’t sound particularly good. The fact GBP is unable to hold gains even with a series of rate rises has led some to suggest it is behaving more like an emerging market currency. To be honest, after Brexit, Covid cost of living crisis and political nonsense, it feels a bit like an emerging market at the moment.

Plenty of attention on Ukraine, it is their independence day celebrations tomorrow but warnings are doing the rounds that Russia will step up attacks on Ukraine civilian infrastructure and government facilities. Mass events in Kyiv have been banned until Thursday and US has embassy told US citizens in Ukraine to leave immediately. The Zaporizhzhia nuclear plant remains under threat as both Russia and Ukraine accuse each other of attacking the facility, which could of course lead to a nuclear disaster to match Chernobyl. Putin has said he has approved a visit to the plant by UN inspectors but I have no idea whether that will actually happen.

So I have arrived back after holidays and all I seem to be reporting on is bad news. Do remember there is always good news out there as well, it just doesn’t make the headlines. We talk about war in Ukraine, but you never see headlines confirming countries are at peace. Its not all bad.

I see the James Webb telescope has revealed pictures of Jupiter that are more detailed than ever before, surprising even some of those involved with the program. Do take a look, although remember the pictures have been artificially coloured as the actual shots were taken in infrared, invisible to the human eye.

And finally, it has been a pretty lively start to the Premier League season with Chelsea and Liverpool struggling after three matches, Newcastle and Leeds looking bright and as much as it pains me to say it, early signs are that Arsenal will be a force to be reckoned with this season. Far too early to call an upset but I do think we’re in for some suprises this season.

- 09.00 EU S&P manufacturing, services PMI

- 09.30 UK EU S&P manufacturing, services PMI

- 12.00 ECBs Panetta speaks

- 14.45 US EU S&P manufacturing, services PMI

- 15.00 US new home sales

- 15.00 EU consumer confidence

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