Good morning
Feds Powell yesterday made it clear that the US central bank will take a very gradual approach to further rate cuts. He said the economy was in a good place and the concerns over the labour market late last year have dissipated. Feds Williams added that inflation could take a time to get to Feds 2% target and still sees rates as mildly restrictive, slightly more dovish comments than some of his colleagues in the Fed. Despite Powell’s rather bullish comments, USD has weakened, with GBPUSD now 1.2460 and EURUSD 1.0370.
UK Chancellor Reeves has been warned she may need to raise taxes and/or cut public spending amid a generally weak economic outlook. Weirdly however, a rather bullish NIESR said Reeves is on track to remain within her fiscal rules, they see growth at 1.5% this year and inflation down to around 2.4% for 2025 before hitting target of 2% next year. These numbers are quite different to those forecast by BoE who look for 0.75% growth and inflation back up to 3.74%. NIESR did say that only one more 25bps cut by BoE was likely this year. The Times has focussed on an EY poll which suggests 82% of UK chief executives are optimistic about business for the next 12 months, up from 67% in September. That’s an interesting number given the unhappiness over recent raises in NIC for firms.
We have seen a move away from safe haven yen buying, helped by talk of a possible ceasefire in Ukraine. Trump says he is working on a peace deal and I have read that Ukraine may be willing to give up lost ground in order to achieve peace. USDJPY is up at 153.55, almost 200 points higher than yesterday’s lows. GBPJPY is 191.25, quite a change from yesterday’s lows which came in around 187.25.
While talk of a possible ceasefire in Ukraine is welcome, the news from Gaza doesn’t make optimistic reading, with Israel warning Hamas that failure to return hostages by the weekend will lead to a renewal of hostilities.
In sport last night, Real Madrid upset Man City with a last minute goal to give them a one goal advantage in the Champions League knockout stage. City were ahead twice in the match but made a couple of mistakes to hand the win to Real. Mark will be in a good mood this morning after Leeds beat Watford 4-0, extending their lead in the Championship table to five points. Plenty of other Championship action this evening, we also have the Merseyside derby with Everton hosting Liverpool in the premier league.
In cricket, India are currently 63-1 in the third ODI match of the series against England. They were 6-1 at one stage but little surprise that the partnership of Gill and Kohli has steadied the ship. England are yet to win a match in the series having been beaten by four wickets in each of the first two ODI matches.
Todays brings the long-awaited US CPI inflation release, expectations for headlines of 2.9% for CPI and 3.1% for the core reading, although the risks seem to pointing a little to the upside. Still, if it’s there or thereabouts we may see little in the way of market reaction. Feds Powell speaks again, a similar speech to yesterday so really its only the Q&A that may bring anything new. The overall message though will remain the Fed is in no rush to move rates. We’ll hear from a couple of other Fed officials through the day.
BOEs Greene speaks this afternoon, she is usually on the more hawkish side but did vote for the 25bps cut last week. We’ll see if she mentions anything about the voting for a 50bps cut, or whether she offers any further thinking on UK rates.
Overnight we’ll have inflation expectations from both Australia and New Zealand. Both are important but unless they are well away from forecasts I think the ongoing Trump tariff talk will be a bigger factor for currencies for the time being.
Have a great day
- 10.00 ECBs Elderson speaks
- 13.30 US CPI
- 15.00 Feds Powell speaks
- 15.00 BoEs Greene speaks
- 17.00 Feds Bostic speaks
- 17.30 ECBs Nagel speaks
- 19.00 US monthly budget statement
- 22.05 Feds Waller speaks
- 00.00 AUS consumer inflation expectations
- 02.00 NZ RBNZ inflation expectations
- 07.00 UK GDP, industrial production
- 07.00 German HICP
Comentarios