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Weaker USD suggests we have reached a peak in US rates

Good morning

Ongoing hope that we have seen the peak in US rates is helping stocks push higher and USD lower. GBPUSD is back up to almost the high seen after last weeks US inflation numbers at 1.2495, EURUSD hit 1.0945 overnight, now 1.0920, and USDJPY has traded as low as 148.70. Even USDCNY has moved lower which will no dount please China who, as we know, have been working hard to prevent CNY depreciation recently. USDCNY fixed on a 7.16 handle, the lowest level since mid-August. In the crosses, GBPEUR remains close to the bottom of recent ranges at 1.1425.

There has been talk that Pimco have been steadily building long yen positions, hoping they will benefit from a US inflation slow down and eventual BoJ tightening. As we know, they could be waiting a long time but they’ll be feeling a little more comfortable with USDJPY back below 150.00. Well worth watching USDJPY and yen crosses for any sign of unwinding of short yen positons.

The Gaza crisis continues, Israel unrelenting in their search for Hamas and their network of tunnels beneath Gaza. Some are reported to be over 80 metres below the surface, covering 500km. Israel have released some footage which is said to show some the tunnel network. Some talk of a potential hostage release, brokered by Qatar, taking place sometime this week but don’t be too excited until it actually happens.

Just back on China for a bit, while the lower USDCNY fix looks positive, I have been reading a few things about vacant China property, either built or partially built. Millions of units are unfinished leaving a black hole in the region of US$440 billion that would need to be filled eventually. It would obviously ridiculous to suggest China could fill those with some of the refugees that are in desperate need of somewhere to live.

Its US thanksgiving this week and as such will feel like a short week in the financial markets even if we have to turn up to our desks. Not much on the calendar today although overnight we will have RBA Gov Bullock speaking ahead of the RBA minutes from the recent meeting where they chose to raise rates. They had tried to offer a dovish rate rise, where rates were pushed up 25bps to 4.35% but they cast some doubt as to whether further rate rises would be necessary. Bullock may offer some additional thinking here. For now GBPAUD is 1.9055, over 250 pips lower than last weeks highs.

As for the weekend, just been and gone, it turned out to be pretty decent. In between picking up what felt like millions of leaves I managed to watch the Las Vegas F1, which was pretty decent in the end despite the problem they experienced in Friday’s practice. Congratulations to the Aussie’s for their surprise win over India in the cricket world cup. I say ‘surprise’, I don’t mean Australia were not up to the task but India on home soil had looked like favourites through the whole tournament.

Englands footballers managed to beat Malta on Friday evening in a pretty unimpressive display, they take on North Macedonia this evening to round off what has been a very successful qualifying campaign. Scotland have also qualified for Euro 2024, drawing 3-3 in their final group match to leave them second in the table.

Finally, have to feel a little sorry for Everton who have been deducted 10 points in the Premier League for breaking financial fair play rules. Not sure why I do feel sorry, they did break the rules, but they cannot be the only ones can they ! As we know Man City and Chelsea are facing charges under FFP, if Everton get a ten point deduction, Man City could be looking at non-league football soon!

- 10.00 German Buba monthly report

- 18.45 BoEs Bailey speaks

- 21.45 NZ trade balance

- 23.00 RBAs Bullock speaks

- 00.30 RBA minutes

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