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  • richard evans

Watching GBPEUR as it hovers around support levels

Good morning

 

Lower than expected CAD inflation yesterday sent USDCAD higher from 1.3475 to 1.3530, not a huge move and its actually 10 pips or so off those highs now.  This supports BoCs most recent rate meeting where they removed the guidance of potential rate rises and said they see inflation slipping lower.  Canada’s Trudeau has since added that he is optimistic rates will come lower this year, sooner rather than later in his opinion.

 

 While the move higher in USWDCAD doesn’t look so big, it did come on a day where USD lost ground on other major currencies, so CAD weakness was actually more pronounced than it looked.  With GBPUSD and EURUSD rising to 1.2665 and 1.0835, GBPCAD pushed up from 1.6980 to 1.7130, EURCAD from 1.4555 to 1.4645.

 

I’ve not seen a satisfactory explanation for the mild USD weakness we witnessed yesterday, some are suggesting it is a sign of improving risk sentiment, pointing at the rally in China equities overnight, although the move came before that and US equities actually ended the day slightly lower.  Even USDJPY lost some ground yesterday, trading to 149.70 although as I type we have broken back above 150.00.  FOMC minutes later this evening could perhaps offer latest Fed thinking although we’ve already heard from many Fed officials since that meeting, mostly singing the same tune, so the chance of a surprise is limited. 

 

GBP has slipped back against EUR, now around the support we’ve seen since late Jan around 1.1670.  BoEs Bailey spoke yesterday and sounded pleased with progress made on inflation so far, suggesting BoE could begin cutting rates even before the 2% target is reached.  BoEs Dhingra was typically dovish yesterday, warning of the downside risks to growth, we hear from her once again today.   

 

This morning we got the latest government borrowing numbers, the UK actually saw a large surplus of some £17bn.  A surplus in January is not unusual due to receipts from self-assessment tax returns, although the surplus was larger than expected.  This has led to some speculation that we may see some tax cuts at next months budget, but I’m not holding my breath.  The countries finances cannot be in a good positon. 

 

In other news, Putin has suggested Russian forces will push further into Ukraine after they finally took Avdiiivka, with Ukrainian hopes really relying on a potential influx of Western weaponry, without which Ukraine are going to struggle.  Meanwhile, UK’s nuclear force of Trident missiles looks worryingly impotent after a missile launch test failed for the second time.   Not much of a deterrent!

 

There will be no report tomorrow morning as I’m out and about this afternoon and tomorrow.  I’ve added Thursdays calendar, its looking pretty full with UK, EU and US PMIs the main events.  We do have a Turkish rate announcement, seems they are expected to keep rates unchanged at 45%.  Today is more about central bank speakers but I’m not looking for any surprises there.

 

-  10.00 ECBs Nagel speaks

-  13.00 Feds Bostic speaks

-  14.00 BoEs Dhingra speaks

-  15.00 EU consumer confidence

-  18.00 Feds Bowman speaks

-  19.00 FOMC minutes

-  21.45 NZ trade balance

 

Thursday

 

-  09.00 EU services, manufacturing PMI

-  09.30 UK S&P services, manufacturing PMI

-  10.00 EU HICP

-  11.00 CBRT rate announcement

-  12.30 ECB minutes

-  13.30 US initial jobless claims

-  13.30 CAD retail sales

-  14.45 US S&P services, manufacturing PMI

-  15.00 US existing home sales

-  15.00 Feds Jefferson speaks

-  20.15 Feds Harker speaks

-  21.45 NZ retail sales

-  22.00 Feds Kashkari, Cook speak

-  00.01 UK GfK consimer confidence

-  00.35 Feds Waller speaks

 

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