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Weak than expected US inflation drives USD lower

Good morning



They shall not grow old, as we that are left grow old Age shall not weary them, nor the years condemn

At the going down of the sun and in the morning

We will remember them.

Laurence Binyon, 1914



A late report today, I’ve been out of the office for a couple of days so had a little to catch up on. Before I went away I’d asked whether a couple of quiet days was too much to ask. The answer seems to have been a resounding ‘yes, that’s too much to ask’.


US elections, weaker than expected US inflation numbers and belief that the Fed will be slowing down the pace of rate rises has seen USD weaken considerably. GBPUSD currently sits at 1.1770, a level not seen since August, despite another set of rather unpleasant GDP numbers this morning. EURUSD has fared equally well, if not better, now 1.0305. GBPEUR at 1.1430, I’d prefer this back towards the 1.1500 area but won’t complain with it being here. Some positive noises over the NI protocol over the past couple of days have helped take GBP off its recent lows against EUR.


A bit of turmoil in the crypto world as FTX run into trouble. Whether their trouble is the result of some slightly foul play by their rival Binance or whether it is of their own doing does seem to be up for debate, but the fall in price of FTX’s own token, FTT, from $26 to $1.5 or so shows the extent of the damage. Customer money is at stake here, many can’t get access to their funds, so it’s a worrying time indeed. I am often asked whether I like crypto. I don’t. I do not understand the need for it. People say it substitutes money but it always has to be valued against a currency which makes it just like another currency. It is volatile, there are countless examples of firms going bust, it has no underlying value, etc etc.


While the price of the relatively unknown FTT collapsed, Bitcoin that we have all heard of fell from the $21,000 area to trade as low as around $15,650. It has recovered to some degree, now $17,350 but bear in mind this is on the back of USD weakness so possibly a touch worse than the numbers suggest. However the fact it is holding up at all is pretty amazing.


Gold has had a storming rally, trading from around $1620 just over a week ago to $1765, a move of around 9%. A lot of that move happened in a pretty short space of time. Talk that China were moving to a war footing over Taiwan and Fed ‘pivot’ to blame, as well as adjusting of CTA positions. I do think money has been moved out of crypto and into gold which could explain its outperformance. Gold is volatile but at least it has something tangible behind it.


In Ukraine we have seen Russian troops pull out of Kherson but there does seem to be a feeling this has come a little bit easy. For sure Russia have been struggling but such a major withdrawal raises concerns of a trap. I do recall back in October there was talk that Russia could destroy a major dam on the Dnipro river which would put Kherson at risk. Zelensky himself likened this to a potential atomic bomb of water. I’ve not seen it mentioned for a while but I remain fearful. It is not yet time to celebrate.


We do have a few things to celebrate however. Englands T20 cricket team reached the finals after an emphatic win against India. They face Pakistan on Sunday morning. Englands rugby league team take on Samoa in the semi-final of the world cup on Saturday afternoon. England beat Samoa convincingly in the group stages and will be hoping for a similar result and a place in the final. The England womens rugby union team has made it to the final of their world cup, facing the mighty New Zealand early Saturday morning.


A big weekend of sport where we must surely have some success. I’m less optimistic about our chances in the football world cup which begins a week on Sunday.


Just to put all of this into perspective however, today is Armistice Day which marks the agreement to end fighting at 11am on 11th November 1918. We know remember all those who have given their lives in service to their country, not just in the first world war but any conflict since. Sadly there have been far too many. I know very few people who have ever been to war and yet I get surprisingly emotional when I think of anyone heading off to battle. The sheer bravery of doing your duty is incredible. I guess it has something to do with being a parent of children who are around the age of many who were sent off to fight. I really cannot imagine how that must have been. Our commitment to remember those who lost their lives is the very least we can do and rather selfishly I hope it is also the most we ever need to do.


So who wins and who loses world cups is of course important. But its not life or death.


Have a great weekend.


- 15.00 US Michigan sentiment survey

- 16.00 ECBs Lane speaks


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