Good morning
The spell of USD weakness came to an abrupt end as the latest US CPI inflation data was released yesterday afternoon. Both headline and core were higher than expected, coming in at 3% and 3.3% respectively. The USD initially pushed higher, GBPUSD traded from 1.2455 to 1.2375, EURUSD from 1.0380 to 1.0315. What followed was a bit of indecision, with the market pushed one way and then the other. Comments from Feds Powell were the same as the previous day, with no mention at all of the inflation data that had been released an hour or so earlier. In the end it was the USD sellers who were happiest, with GBPUSD and EURUSD trading steadily higher through the night.
This morning the UK’s latest GDP numbers were released and made quite pleasant reading, the monthly, quarterly and yearly readings coming in at 0.4%, 0.1% and 1.4%, all well above expectations, with an upward revision to the previous year on year number to round off the good news. Perhaps NIESR were right after all with their bullish growth forecasts. GBP pushed higher, with GBPUSD moving up from 1.2485 to 1.2515, although it has been unable to hold those gains and as I type is back around the 1.2480 area.
GBP had lost ground the EUR yesterday, dropping to the 1.1970 area after the London close. The GDP data did give the pair a bit of a boost, it briefly regained 1.2000 but as with GBPUSD was unable to hold its gains and now trades back at 1.1980. EUR is finding support after suggestions from ECBs Nagel that the ECB’s latest rate cut cycle may have run its course, although I see ECBs Vujcic has said three more cuts this year is not reasonable. Quite a difference of opinion there.
Also supporting EUR are the headlines about possible Ukraine/Russia peace talks, Trump has said he’s spoken to Putin and may well meet him in Saudi Arabia, while China also seem to want to get involved in the peace talks. Whether those talks would involve Ukraine remains to be seen, I’m not so sure they would be happy having the US carve up their land in talks with Putin. However I see US Treasury Secretary went to visit Zelensky to discuss a minerals deal, which would likely serve to protect Ukraine after the invasion is over. Perhaps a peace deal is closer than we think. I still think Ukraine will want to recover land it has lost since the Russian invasion but this seems an unlikely outcome.
Aussie and NZ inflation expectations were out overnight, Aussie numbers were above forecast at 4.6% while NZ data was lower at 2.06%. I’d have expected this to push AUDNZD higher but it actually a smidge lower now at 1.1115, having seen a high yesterday of 1.1140. However it remains above 1.1100 having broken up at the start of this week, levels not seen since Nov 2024, back then the rally lasted only a few days before slipping back to the 1.10 region.
In sport, England lost to India in yesterday ODI to leave the series at an unpleasant 3-0. Liverpool drew with Everton in a rousing Merseyside derby, the last to be played at Goodison Park with Everton moving to their new ground next season. And Leeds lead at the top of the Championship is reduced back to two points as both Sheffield Utd and Burnley won last night. Plenty of Premier League action at the weekend, if you want to see goals you may wish to tune in to Spurs v Man Utd on Sunday, with both teams separated by just two points down in 14th and 13th respectively. The loser could see themselves as low as 16th in the table if other results go against them. Yikes!
US PPI today will be in focus particularly given the higher than expected CPI yesterday. I’m out and about for the next couple of days and am away Monday as well, so I’ve added to the calendar in case I’m not around to send out a report. I’ll be hoping for some quieter markets while I’m out of the office.
That’s about all for now, have a great day and I’ll take the opportunity to bid you a wonderful weekend as well.
- 09.00 ECB economic bulletin
- 10.00 EU industrial production
- 13.30 US PPI, initial jobless claims
- 17.00 ECBs Nagel speaks
- 21.30 NZ business PMI
Friday
- 10.00 EU GDP
- 13.30 US retail sales
- 14.15 US industrial production
- 21.00 Feds Logan speaks
Monday
- 11.00 Bundesbank monthly report
- 14.30 Feds Harker speaks
- 03.30 RBA rate announcement
- 04.30 RBA press conference
- 07.00 UK unemployment
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