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  • richard evans

USD unwinds some recent losses, focus on US data this afternoon

Good morning

A bit of a turnaround in the currency markets yesterday with US dollar pushing a bit higher through the afternoon. GBPUSD traded down to 1.2605, EURUSD to 1.0805, leaving GBPEUR at 1.1665, the single currency not helped by ECBs Schnabel who said further rate rises are unlikely after Novembers inflation report. ECB inflation expectations are due out this morning, look for a drop in the one year expectation from 4% to around 3.8%, while the 3 year rate could remain steady at 2.5%.

USDJPY pushed up from 146.50 to 147.45 yesterday but has drifted back to 146.80 despite Japan inflation numbers coming out softer than expected overnight. And gold has settled back to a more comfortable $2035 after its spike higher Sunday evening.

UK Chancellor Hunt has described the UK economy as having a sprained ankle, rather than the broken leg that had been suggested previously. He believes the changes made in the Autumn statement will help bolster growth.

RBA left rates unchanged at 4.35%, they sounded less hawkish than many had expected, saying there were signs inflation is continuing to moderate and warning of an uncertain outlook for the Chinese economy, as such AUD is a bit lower, GBPAUD now up at 1.9180 having reached a high overnight of 1.9220 following the announcement. A couple of major banks are still bullish on AUD, more AUDUSD though and seem happy to go long in the 0.65’s (currently 0.6580) looking for 0.68+. Below 0.6500 I think they may have to rethink.

In other news, Ryanair seem to have really surpassed themselves this time with the introduction of a new procedure for travellers who do not wish to pay to reserve a particular seat on their flight. In the past, travellers could choose to pay the fee to book a ticket or not, and them print or download their boarding pass accordingly. Now it appears that those not willing to pay the fee will not be able to print or download their boarding pass, but will have to queue at the airport to receive it. Now, I have no problem in firms finding new ways of making money but this really seems to force customers into a difficult choice of paying or queueing, which doesn’t seem particularly fair.

Mind you, its probably small fry compared to my favourite gripe at the moment, the UKs water companies, who have failed over the years to invest in their infrastructure but have instead paid huge dividends to their shareholders. Over this time they have at times been pumping raw sewerage into our rivers and seas, which I think we can all agree is pretty disgusting, as well as damaging to health and environment. Thames Water has now said that it will take time to improve services while managing its £14.5bn debt. How can a firm in so much debt pay money to shareholders? Only one thing for it, our prices will be going up. I do regard it as an absolute travesty that firms are allowed to act in this way, verging on criminal.

Enough of my moaning for one day! Time to calm down, settle back and see which way the markets take us today. With US ISM and JOLTS job data this afternoon we cannot rule out more USD volatility, uh to have a crystal ball….

- 09.00 ECB inflation expectations

- 09.00 EU composite PMI

- 10.00 EU PPI

- 14.45 US S&P composite PMI

- 15.00 US services ISM, JOLTS job openings

- 00.30 AUS GDP

- 07.00 UK BoE Financial Stability Report

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