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USD weakness continues as Trump downplays China tariffs

richard evans

Good morning

 

The USD weakness theme continues, this time helped along by Trump who is demanding Fed’s Powell cuts rates, suggesting he knows better than the Fed officials who are tasked with setting monetary policy.  Trump’s comments that he’d prefer to not use tariffs on China but instead make a deal with Xi, also helped push USD lower.  GBPUSD has been to 1.2415, EURUSD to 1.0495, the highest we’ve seen since mid-Dec.  Both pairs currently just 10 pips or so off those highs. 

 

Equities are trading firm with the likes of S&P500 making new highs, China stocks are higher and AUD, something of a proxy for China, is also up, AUDUSD now 0.6320, highest since mid-Dec, with GBPAUD trading towards recent lows around 1.9600.

 

GBPEUR around the 1.1820 area having been up around 1.1870 earlier this morning, EUR making gains after better than expected PMI’s, with the main EU number still to come at 9am.  We have traded above 1.1800 for almost exactly five months, there has been downside pressure this week but so far the support around 1.1815 is holding. 

 

BoJ did raise rates by 25bps to 0.5% and JPY did appreciate as a result.  USDJPY traded down from 156.40 pre-announcement to 154.85 following the press conference, almost matching the lows seen Tuesday morning.  Of course the generally lower USD has helped.  USDJPY now 155.20 as I type, GBPJPY 192.40  which is exactly where it was this time yesterday.  Japan CPI had been released before the rate decision , coming in hot at 3.6% against 2.9% previously, no surprise then that BoJ pushed their inflation forecasts higher.  2025 CPI is now expected to reach 2.4% from 1.9%.  GDP forecasts were unchanged.

 

In the UK, storm Eowyn is set to wreak havoc as a rare red weather warning takes hold across Ireland and Scotland.  Flights and ferries are being cancelled across Ireland.  Even down here we’ve already had some decent rain and strong gusts with possibly more to come, indeed we have a pretty grim forecast for the next few days.

 

In sport, Spurs managed a rare win with a 3-2 victory over Hoffenheim although in true Spurs fashion they did make it rather difficult for themselves.  Still, a win is a win.  Man Utd got a late goal to win 2-1 against Rangers.  Premier League action this weekend sees Spurs take on Leicester who are currently second from bottom.  Spurs should win but then again they ‘should’ have beaten Ipswich, Wolves, Crystal Palace and Everton to name just some of the teams Spurs have lost to.  Leicester haven’t had a point since their draw with Brighton on 8th Dec.  This is their chance…  Pick of the matches is surely Man City v Chelsea, although Bournemouth v Forest will be an interesting game between two teams currently going well.

 

Have a great weekend as and when it comes.  Hope the storm doesn’t affect you too much….

 

-  09.00 EU manufacturing, services PMIs

-  09.30 UK S&P manufacturing, services PMIs

-  10.00 ECBs Lagarde speaks

-  11.00 ECBs Cipollone speaks

-  14.45 US S&P manufacturing, services PMIs

-  15.00 US Michigan sentiment survey

 

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