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  • richard evans

USD weaker after disappointing initial jobless claims

Good morning

US retail sales yesterday came out better than expected but attention was drawn more to a slightly worse initial jobless claims number, bringing into question whether the US labour market is starting to show signs of a struggle. As a result, thoughts turn to whether the Fed are really going to raise rates next month or whether they will wait for more information about the impact of rate rises already made. US stocks closed higher, S&P actually closed above the level it was at when Fed started raising rates back in March 2022.

The US dollar moved the opposite way to US stocks, it traded weaker against most currencies with GBPUSD pushing up to 1.2815 and EURUSD to 1.0960, both currently within 30 pips or so of those highs. USDJPY has not been hit by USD weakness, the pair trades up to 141.40 after BoJ kept policy unchanged overnight, which sees GBPJPY now 180.70 and EURJPY 154.50. Japan FinMin Suzuki once again said they are watching FX and that excessive moves are undesirable, but so far we have seen no action other than talk.

ECB did raise rates 25bps yesterday to 3.5% as expected, another rise in July may be on the cards but after that it would seem that ECB officials are a bit mixed in their opinions, with some wanting a July rate rise to be the last in this cycle. Others however see further rate rises, this difference of views is likely to dominate the summer markets and direction for EUR. Some have pushed back their forecast of the first ECB rate cut from March 2024 out for a few months more.

BoE rate announcement next month, there seems little doubt that we will see anything other than a 25bps rate rise and further rises are expected beyond that. There is even a suggestion that UK rates could go higher than US rates which may well offer additional support to an already high GBPUSD. GBPUD has had quite a journey over the past couple of years, trading down from around 1.4250 in July 2022 to the Truss/Kwarteng lows in Sept 2022 around 1.0370, now some 2,500 points higher than that.

It’s a fairly light economic calendar today although US Michigan survey could have the potential to compound USD weakness if it comes out weaker than expected.

This weekend brings more sunshine although Sunday looks like we could see some heavy rain and thunder storms. I do like a good storm from time to time but Mark will likely be rocking his socks off at the Isle of Wight festival so perhaps if it could hold off until Monday it would be appreciated. Mind you it’s not just festival goers who have interest in the Isle of Wight today. I see that the fossilised remains of a new species of dinosaur has just been discovered there. It was big, spiky and apparently a plant-eater. Not things Mark can be accused of being.

If the rain does arrive Sunday there is a decent amount of sport to watch on TV. The Ashes begins today although of course that could be disrupted by the rain. England play Malta this evening in the qualifying for the Euro 24 championship. Grealish may just have sobered up in time for that. And of course we still have the US Open golf to enjoy. I’d hoped the course could prove to be a test for those top players, but both Fowler and Schauffele hit the lowest scores ever for the US Open, each taking just 62 shots for the 18 holes. Mind you there are five par-threes. McIlroy hit a 386 yard drive on one hole yesterday, that’s nearly quarter of a mile. Really quite a ridiculous distance.

Have a great weekend, hope you stay dry whether you’re at the festival or simply basking in the sunshine at home with a cold beer and a bbq….after cutting the grass of course……

- 10.00 EU HICP

- 12.45 Feds Waller speaks

- 15.00 US Michigan sentiment survey

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