Good morning
Well what a difference a day makes. Or rather, what a difference one set of weak PMI numbers makes. Both US services and manufacturing PMIs came in weaker than expected yesterday, sending USD lower. GBPUSD, which had been down at 1.2300 on Monday, bounced to 1.2460, while EURUSD pushed above 1.0710 to hit 1.0715 overnight. Both pairs are just off those highs now, GBPUD 1.2445 as I type, EURUSD 1.0695.
GBPEUR is 1.1635 which is 70 pips or so up from yesterdays lows. BoEs Pill mentioned yesterday that BoE rate cuts were a bit closer but still feels he’d prefer to see several more months of data before being convinced we are at the right time for rate cuts. Pill did add that there is no reason for BoE, ECB and Fed to work in unison on rates. Chances of a UK rate cut in June seem to run at about 50/50 according to a recent Reuters poll of economists.
USDJPY didn’t see significant declines as a result of the weaker USD, in fact it is trading right now at 154.90 which is the top end of this move so far. There is a BoJ rate meeting that concludes in the early hours of Friday morning. Ueda has recently been talking about the potential for rate rises to counter the weak yen but so far his warning has fallen on deaf ears. The weak yen will certainly be on the agenda at the meeting, whether or not they take action remains to be seen.
Aussie inflation numbers came in above expectations overnight, sending AUD marching higher as banks push back their forecasts for rate cuts well into 2025. The annual rate came in at 3.6% against an expected 3.4%, although RBA will take some comfort from the fact the reading, while above expectations, was still down on the previous month. However, the areas RBA are most worried about such as domestic and services inflation both saw the highest quarterly increase for five quarters.
It isn’t the biggest day for data today, German IFO this morning and US durable goods this afternoon being the key. ECB’s de Cos, Nagel, Villeroy and Cipollone all speak this morning, while Schnabel speaks this afternoon. If they do touch on policy, I can’t see them adding much more to the comments we’ve had recently, namely a rate cut in June looks more than likely.
Arsenal did their title chances no harm with a 5-0 demolition of Chelsea, if it comes down to goal difference then they are currently well in front. Liverpool have a game in hand but can’t take top spot due to Arsenal’s goal difference, Man City can still take the lead if they win their two games in hand. So much to play for in the last few matches of the season. Leicester meanwhile took a giant step nearer promotion, beating Southampton 5-0. Southampton have pretty much blown their chances of an automatic promotion spot, instead they’ll have to settle for the play offs.
Still in sport, I’m not a great runner and certainly have little desire to run a marathon. However my mind could be changed as I have been reading about a chap who ran this years London marathon, stopping every mile to have a taste of wine. My interest in the event has been rekindled. Mind you, it reminds me of a dream I had years ago where I ran the marathon, having a point of lager after each mile. All was going well until I got to 24 miles and someone pointed out how many pints I’d had. At that point I realised I couldn’t drink that many and fell over. It’s still likely to be the closest I’ve ever got to long distance running.
Have a great day. Should stay dry today but its going to be chilly, highs of around just 10°c which is pretty cold. Wrap up warm!
- 09.00 German IFO
- 13.30 US durable goods orders
- 13.30 CAD retail sales
- 18.30 BoC summary of deliberations