Good morning
USD has remained under pressure into the close last Friday after the Fed’s 50bps rate cut, GBPUSD trading around 1.3320, EURUSD at 1.1160. This morning we have seen both pairs sold off rather sharply to 1.1120 and 1.3275, the USD pushing higher on what I can only think is safe-haven buying as Israel conducts extensive airstrikes on Hezbollah targets in Lebanon, amid concerns that a ground offensive may be following soon. The attacks come after Hezbollah launched a missile strike on Israeli targets over the weekend. Gold prices remain with US$10 or so of the all-time high that we saw earlier this morning, now $2,620.
A set of weak German PMIs this morning did nothing to help the single currency, EURUSD slipping back a few more points to 1.1110 which helped GBPEUR push up to an impressive 1.1945. Meanwhile in Germany, it looks as though the ruling SPD has managed to hold off the right-wing AfD in the Brandenburg regional elections. It was close, just one or two percentage points in it.
USDJPY is off its overnight highs which came in around 144.45, which also happened to be the highs seen on Friday afternoon. Watch that level. For now though USDJPY is at 143.65, perhaps Yen has also seen some safe haven buying this morning. But we are still well off the recent lows and there is some talk that now the Fed rate cut is out of the way, we could see a return of the yen carry trade, ie upside USDJPY, EURJPY, GBPJPY etc. GBPJPY, which had been below 184.00 last week, hit 192.25 overnight, before that Yen buying dragged it back down to 190.50.
PMI numbers out from UK, EU and US today, plus several central bank officials will be speaking. In the early hours of tomorrow morning we’ll hear the latest rate decision from RBA. Market is looking for RBA to keep rates on hold at 4.35%. You may recall that at the last RBA meeting they had even considered a rise in interest rates. We certainly feel it is far too early for RBA to consider cuts. AUDJPY could also be a cross with upside potential.
The next couple of days look pretty quiet on the calendar but Thursday we’ll hear from several Fed officials including Powell, while Friday brings the important PCE deflator figures from the US, one we know the Fed watches closely. If this can stays in line with expectations we’ll be confident the Fed will be able to focus more on employment numbers.
A bit of excitement over the weekend in terms of sport. Yesterday’s match between Man City and Arsenal was a bit of a cracker, with City managing to sneak a draw with a 98th minute goal after having had almost 90% possession in the second half. Arsenal had had a player sent off in the first half for two yellow cards, neither of which I think they can really complain about. Spurs managed to look reasonable as they beat Brentford to earn a much-needed three points.
Antony Joshua managed once again to disappoint, losing to Dubois leaving a big question over his career. A win would probably have set up a huge Joshua v Fury bout, but that is looking less and less likely. Another sportsman who seems to have made a habit of snatching defeat from the jaws of victory is golf’s McIlroy, who lost a play-off at the PGA championship at Wentworth.
Otherwise, while Saturday turned out OK, we had a lot of rain here Sunday and it’s the same again today, indeed the forecast is pretty wet and gloomy all day. Looks like summer is over!
Have a great day
- 09.00 EU PMIs
- 09.30 UK S&P PMIs
- 13.00 Feds Bostic speaks
- 14.00 ECBs Cipollone speaks
- 14.45 US S&P PMIs
- 15.15 Feds Goolsbee speaks
- 18.00 Feds Kashkari speaks
- 05.30 RBA rate announcement
- 06.30 RBA press conference
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