Good morning
It was another quiet day in the currency markets yesterday, general USD strength was the main theme which saw GBPUSD trade down to 1.2945 at one point, EURUSD holding just above 1.0800. GBPEUR traded to 1.1980 for a while but regained 1.2000 into the London close.
This morning the US dollar remains firm, GBPUSD at 1.2965, while EURUSD has finally slipped below 1.0800, reaching 1.0780 so far, within 10 pips or so of the August lows. GBPEUR currently 1.2030. USDJPY has benefitted from the USD strength, trading up to 152.50 this morning, the highest level since late July. GBPJPY has been dragged up to 197.80. Not heard much from Japanese officials but no doubt we’ll soon get more of the ‘we are watching yen levels closely’.
USDCAD has been pretty stable heading into the BoC rate announcement today. A 50bps cut is widely expected which would take rates to 3.75%, I’d still expect some CAD weakness even though it must be mostly priced in, but the key is likely to be the press conference where we will be hoping to get clues as to the rate path going forward. I mentioned CADJPY yesterday, at the time it was 109.20, the pair now trades at 110.20, driven by yen weakness rather than CAD.
I’ve been looking for any value in overnight option plays just in case we do see a bit of volatility today. Upside USDCAD perhaps, the 1.3825 overnight USDCAD call costs 25 cad pips, or for some two way interest you could have the overnight 1.3800/1.3850 strangle which costs around 30 cad pips.
I see the Trump team has filed a complaint accusing the UK’s Labour party of foreign interference in the election. He sees the Labour party as ‘far-left’ and refers to an online post from Labour’s head of operations which said nearly 100 members would go to the US to volunteer in support of Harris. This does not bode well for relations between US and UK should Trump be elected. And why on earth would Labour members go and get involved in the US election? Is this normal?
There is a BRICS summit in Kazan, a Russian city some 900km from Moscow. China’s Xi, India PM Modi and Iran President Pezeshkian will all be present, along with others from twenty or so nations. The summit is clever, it shows the West that despite sanctions Russia has many allies and could challenge the G7 if they really got their act together.
Whether they can actually agree on anything remains to be seen, not all members are completely anti-West and some, such as India and China, don’t get on particularly well. I have mentioned before the ongoing border dispute in the Arunachal Pradesh region which has seen deaths of both Indian and Chinese soldiers in the past. However, they do seem to have reached some sort of agreement regarding the border issues ahead of their meeting. The fact that all these nations are getting together is a clear sign that Russia can exist and does have some ‘friends’ despite Western sanctions.
Moldova might not be Putin’s favourite place, as they appear to have voted for EU membership with the tiniest of margins. Well, the vote isn’t to actually join the EU, but to change the constitution to allow it. There will be another referendum at some point. Plenty of talk of people being paid to vote and Putin has made it clear he believes the country should be linked to Russia and the integration process of former Soviet territory. Mildly worrying, particularly if Ukraine was to fall into Russian control.
In the Champions League, both Arsenal and Aston Villa won their matches last night. Real Madrid came back from 2-0 down to beat Borussia Dortmund 5-2. Man City and Liverpool play this evening, but Barcelona v Bayern Munich could be the one to watch. Remember though, the real action takes place tomorrow with Spurs playing Dutch side AZ Alkmaar in the Europa League.
It’s another day full of central bank speakers but I still don’t expect anything out of line from them, just more of the same. Exception could be RBNZ Gov Orr who speaks after to London close, I’m wondering if he’ll make any reference to the forecast of a 50bps rate cut in November, and the potential for perhaps even a 75bps cut.
That’s about all for now, have a great day
- 14.00 BoEs Breeden speaks
- 14.00 Feds Bowman speaks
- 14.45 BoC rate announcement
- 15.00 US existing home sales
- 15.00 EU consumer confidence
- 15.00 ECBs Lagarde, Lane speak
- 15.30 BoC press conference
- 15.30 ECBs Cipollone speaks
- 17.00 Feds Barkin speaks
- 18.00 RBNZs Orr speaks
- 19.00 Fed beige book
- 21.30 BoEs Bailey speaks
- 23.00 AUS manufacturing, services PMI
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