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Weak UK retail sales sends GBP lower despite Truss departure

Good morning

Truss has something to celebrate. Despite her recent insistence that she would be leading the Tory party to the next general election, she has now won the ‘shortest serving Prime Minister award’, lasting just 44 days in office. The previous holder was George Canning who lasted 119 days, his tenure ended with his death rather than resignation. So once again the Tories are looking for a new leader and we’ll know within a week who that will be. Sunak is favourite, Boris Johnson is second favourite. He is reported to be cutting short his holiday in the Caribbean to return to Westminster. Contenders need to have 100 supporters by Monday to be in the race. Jeremy Hunt is a surprising 400-1 shot, it looks as though he’ll stay as Chancellor and concentrate on the fiscal plan to be announced at end-October.

As she announced her resignation, GBP jumped higher. What a terrible honour. GBPUSD traded up to 1.1335, GBPEUR up to 1.1525, although the move did not last long, once again GBOP unable to hold gains, and some disappointing retail sales numbers this morning has helped push those pairs down to lows of 1.1175 and 1.1435 respectively. There is very little good news to offer any support to GBP and i continue to look for downside trade structures.

USDJPY is trading in mid-150s after breaking through that 150 level yesterday evening, no sign of intervention but as you know I don’t think this will come until after the G20 meeting which is mid-November. I recall Japanese officials making reference to this meeting a few times recently and they have probably worked out that unilateral intervention just won’t work. Whether they really want a stronger yen is up for debate but if they did want to intervene again, a coordinated effort would make a significant difference.

While the likes of Yen and GBP are clearly weak, a lot of this is down to a very strong US dollar. Fed officials continue to talk of more rat her rises and latest thinking seems to be another 75bps rise in both Nov and Dec which would see rates up to 4.75% by year end. A further 50bps rate rise in early 2023 may also be on the table, while we cannot discount the chances of a full 1% rise in November after so much talk from those Fed members. There cannot be much chance of US dollar weakening with all this on the horizon.

Ukraine have accused Russia of setting charges which could destroy a major dam on the Dnipro River in the Kherson region, putting many lives, and towns including Kherson, at risk. Zelensky says it would be a catastrophe on a grand scale, some likening it to an atomic bomb of water. It would surely be a sign of weakness from Putin but as we know, he has no problem when it comes to destroying large swathes of Ukraine.

Just one story has put a smile on my face and it is really a bit tragic, but my childish humour means I can’t stop myself. In Tokyo a conservation worker tasked with looking after the historic site of Japan’s oldest toilet, dating back some 600-700 years, accidentally reversed his car into the building. Experts say the damage can be repaired. Just as well he owned up to it, otherwise investigators would…….wait for it……have nothing to go on…..

- 13.30 CAD retail sales-

- 14.10 Feds Williams speaks

- 15.00 US consumer confidence

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