Good morning
We saw some renewed USD weakness take hold yesterday afternoon which helped push GBPUSD up from 1.2230 to a high of 1.2360 into the London close, while EURUSD moved up from 1.0340 to 1.0435, an area that has been tested a few times this week but has so far failed to break. GBPEUR is a touch higher at 1.1840.
Data released this morning shows UK government borrowing is higher than planned for this finanacial year and indeed December at £17.8bn was higher than the £14.6bn estimated in the October budget. GBP did dip on the announcement but has since regained most of its immediate losses.
EU’s von der Leyen has said the EU will look to forge alliances with US although Reuters reports Trump has said he is willing to hit EU with trade tariffs. Before we in the UK get too smarmy about no longer being in the EU, remember Starmer and his crew are absolutely not in Trump’s good books.
Trump is also talking about renegotiating the Canada/Mexico trade agreement, and warns China of tariffs as he still sees China as being largely responsible for fentanyl imports. China stocks traded lower overnight on the news. He has warned Putin of more sanctions if he won’t negotiate over Ukraine, meanwhile both Putin and China President Xi have talked over video link, confirming a strong Russia/China relationship.
Both Canada and New Zealand reported inflation numbers yesterday, both came in on the weaker side. NZD moved a touch lower against USD as the idea of a further 50bps rate cut was reinforced. A slightly different story for CAD initially with USDCAD trading down from 1.4450 to 1.4410 on the release and then the weaker USD saw the pair trade as low as 1.4310 into the US close. NZDUSD and USDCAD are now 0.5655 and 1.4330 respectively, and 2.1755 and 1.7665 against GBP.
In football, Liverpool top the Champions league table with seven wins from seven after beating Lille last night. Villa lost to Monaco making their qualification to the next stage less likely. Barcelona came from behind to beat Benfica 5-4 in what sounds like an incredible match which saw penalties, late goals and a bizarre goal which saw the Benfica keeper kick the ball against the head of a Barca player, only for the ball to rebound into the net. Arsenal and Man City play this evening.
Anyone complaining about the cold weather we are having should cast their eyes over to the US where snow storms are hitting southern states, something that is quite rare. The unusually cold weather is also affecting more northern states, New York could see snow nearly two feet deep. Even so, not quite on a par with Canada which suggests could see temperatures as low as -50°c in some areas taking wind chill into account.
Lagarde speaks later from Davos, no doubt she’ll be trying to promote EU’s position with the Trump administration, otherwise it’s a pretty quiet day on the economic data front. Still, with Trump in full swing, the potential for more volatility certainly remains.
Have a great day
- 11.00 German Bundesbank monthly report
- 15.15 ECBs Lagarde speaks
- 18.30 ECBs Nagel speaks
- 23.50 Japan trade
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