Good morning
It was a reasonably quiet day yesterday as we’d expected given the US holiday. USD strength was the main theme, continuing the moves we saw at the end of last week. GBPUSD traded as low as 1.2855, EURUSD was briefly down at 1.0630 through the afternoon, while USDJPY held its previous overnight gains to stay in the high-153’s.
GBPEUR traded above 1.2100 for the first time since April 2022. It was a short-lived spike, the pair traded back down to 1.2080 into the London close but the difference between ECB and BoE interest rate outlooks continue to offer supporting to GBPEUR. USDJPY held its previous overnight gains to sit for most of the day in the high 153’s.
Since the London close yesterday we have seen the USD buying theme continue. GBPUSD is now down at 1.2810, EURUSD at 1.0630, although USDJPY has failed to make further gains, still sitting in the high-153’s. There has been some suggestions that the Fed will pause its rate cut cycle following Trump’s election victory which would certainly go some way to explaining this USD strength. GBPEUR is off its highs at 1.2050 but still seems well supported, the notable difference between ECB and BoE rates and rate outlooks continue to have a role here.
ZAR had an interesting day, losing about 3% from last week’s levels, with GBPZAR moving from a morning low of 22.68 up to around 23.15. The rand weakness seems to stem from various issues including lower gold prices and perhaps more significantly some uncertainty as to how Trumps victory could impact South Africa. Remember, back in early 2023 there had been a suggestion that South Africa had sent arms to Russia. I’m not sure of the outcome of the resulting investigation but if they were ultimately deemed to have done so there is a good chance Trump will take more action than Biden did.
This morning we had UK employment numbers which were something of a mixed bag. The unemployment rate was up and the employment change was down, however claimant count was lower while average earnings were above expectations. Still, these numbers come before any impact of the recent UK budget, specifically the increase in employer national insurance contributions. It may take some time to see what impact, if any, these tax increses have on overall employment numbers. We also had the latest inflation numbers from Germany but as usual they were very much in line with expectations and have had little market impact.
Do keep your eye on GBPINR which this morning briefly traded below 108.00 for the first time since mid-August. USDINR is just short of 84.40 but the GBP weakness has sent GBPINR from a high of around 112.50 just six weeks ago. The big question now is whether this move continues, for now it has moved off the lows to 108.10. One to watch, that’s for sure.
As you know I’m not a fan of Bitcoin but I do follow its movements for interest. It has reached a high of almost US$90,000 an I’m sure there are many looking at the US$100,000 area as a target. Quite why it has such value is frankly beyond me, but I am certainly left ruing the fact I failed to buy some Bitcoin, even a hundred dollars worth, when it was trading below $0.10, or even below $0.01 if memory serves me correct. I’d be a multi-millionaire that’s for sure. Although I have no doubt I’d have sold them out at $10 and thought I was clever with a handsome profit!
North Korea and Russia have signed a mutual defence treaty which calls for either side to come to the others aid in case of an armed attack. We believe North Korean troops are already on the ground in Ukraine, but I think this is a worrying development.
The rest of the day is limited in terms of economic data but we will hear from several Fed officials who are speaking after the blackout period before last week’s FOMC rate announcement. We’ll look for any comment as to whether the Trump election victory will impact thinking on interest rates, but its too early to get anything conclusive.
I see Gary Lineker is leaving Match of the Day at the end of this season after 25 years. I actually remember his very first appearance as host on the show and I have to say it was pretty terrible, but he grew into the role and whoever replaces him has pretty big boots to fill. They probably won’t get an income to match Lineker’s £1.3 annual pay, I never begrudged him that but iIts just a shame he got a bit political and outspoken on social media from time to time which, for me at least, dented my support of him.
Have a great day
- 10.00 German ZEW
- 14.00 ECBs Cipollone speaks
- 15.00 Fed’s Waller speaks
- 15.15 Feds Barkin speaks
- 19.00 Feds Kashkari speaks
- 22.00 Feds Harker speaks
- 00.30 AUS wage price index
Opmerkingen