GBP hits five month lows against EUR

Good morning

A couple of pretty big events taking place, the first being the ceasefire between Israel and Hamas which has seen both Hamas hand over hostages and Israel release prisoners.   As we know any ceasefire in the region is fragile and how long it holds remains to be seen but with Hamas due to release just three or four hostages each week we can only hope it last a long time.

The other big piece of news is Trump’s inauguration which takes place today.  Markets are waiting for the flurry of executive orders Trump has promised to announce just minutes after he is officially in power.  Immigration and climate are two key topics in the spotlight although there will be plenty of others.  The key for the markets in the short term is the possible introduction of trade tariffs and whether they are implemented in full on day one or introduced gradually, as had been suggested recently.  The UK’s special relationship with the US is under some threat given Labour’s attempts to influence the US election last year. 

The world’s good and the great meet in Davos this week for the latest World Economic Forum.  Rachel Reeves is going to be there blowing the UK’s trumpet and mingling with world leaders, including Trump i think.  Fingers crossed that goes well.

Best we don’t dwell on the sport that took place over the weekend.  Spurs lost to Everton which I think means they have taken just five points from the last 30 available.  That’s not good.  Big Ange is under pressure, yes Spurs have a significant injury problem but they are still playing the tactics of a team with a full squad available.  The relegation zone isn’t that far away now.  Yikes. Mark’s Leeds are top of the championship, there is a chance the two teams won’t meet next season.  Liverpool remain top, Notts Forest joint second with Arsenal.

So to the markets this morning.  GBPUSD is loitering just below 1.2200, EURUSD just above 1.0300, which puts GBPEUR at 1.1810, it’s lowest level since August last year.  UK unemployment numbers are due early tomorrow morning, we are expecting to see a small rise in the unemployment rate and the number of claimants.  Otherwise it is a quiet week for UK data until Friday when we get UK, EU and US PMI readings.  Canadian CPI inflation is out tomorrow, Japan’s CPI is out Thursday night, just ahead of the BoJ rate announcement in the early hours of Friday morning, where a 25bps rise is expected.

Have a great day

-  15.30 BoC business outlook survey

-  17.00 US President inauguration

-  21.30 NZ business PSI

-  07.00 UK unemployment

GBP falls on weak UK retail sales data

Good morning

US retail sales were mixed yesterday with a lower than expected headline partly offset by a revision higher to the previous months data.  Initial jobless claims were a touch higher than expected.  The US dollar had been pushing higher into the numbers but this was reversed as the afternoon went on, with GBPUSD trading up to 1.2245 into the London close, some 70 points off its lows, while EURUSD was up around 1.0300, 60 points higher than the lowest point of the day.   GBPEUR was a little higher on the day, reaching 1.1880.

The last thing I wrote in yesterdays musings was i feared UK retail sales due out this morning could be bad.  And boy was I right.  Downward revision to the previous month as well as a large miss in December sent GBP lower, GBPUSD from 1.2220 to 1.2160 and GBPEUR from 1.1870 to 1.1830.  Both off those lows as I type, now 1.2190 and 1.1840, but this is another worrying piece of UK data following softer inflation and GDP earlier in the week.

USDJPY traded below 155.00 briefly overnight as markets continue to believe a rate rise from BoJ next week is highly possible.  Now off those lows at 155.65, GBPJPY is 189.80 having been dragged down below 190.00 by the weak UK data this morning.  Meanwhile China data overnight surprised to the upside, AUD seems to have been given a boost by the data with GBPAUD down to 1.9620 and AUDNZD back up to around 1.1100.

It is Trump’s inauguration on Monday.  There has been a lot of talk of tariff increases on day one of his Presidency although concerns of immediate 100% tariffs have recently been replaced with talk of graduated tariffs.  I don’t know how this is going to go but suffice to say that Trump is perfectly capable of upsetting an already wobbly apple cart.  Never a dull moment with him, that’s for sure.

Trump is still looking at taking Greenland under his wing, I also see he is getting involved in the UK’s return of the Chagos Islands back to Mauritius.  He will no doubt be looking to protect the important military UK and US base on Chagos, but this seems a clear case of the US getting involved in the sovereignty of other countries.

In football, Spurs slip to 14th in the league as Man Utd come from behind to win 3-1 against Southampton.  Plenty of premier league action over the weekend, the highlight could be Arsenal v Aston Villa tomorrow although Brentford at home to Liverpool could well be a decent match.  Spurs will be desperate for points against Everton on Sunday, defeat for Spurs could make life difficult for big Ange.

That’s all from me for now, some second tier US data this afternoon but nothing on the agenda that would normally suggest major volatility.  Save that for Trump next week perhaps.

Have a great weekend as and when it comes

-  10.00 EU HICP

-  10.00 ECBs Nagel speaks

-  11.00 ECBs Cipollone speaks

-  13.30 US housing starts building permits

-  14.15 US industrial production

GBP unable to hold post-US CPI gains

Good morning

US inflation yesterday came in pretty much in line with expectations, indeed the core reading was actually a touch lower than estimates at 3.2%, all of which helped dent the recent hawkish USD theme and sent GBPUSD up to a high of 1.2305 and EURUSD to 1.0350.  The move didn’t last long mind you and into the London close the two pairs were back at 1.2200 and 1.0275 respectively, with GBPEUR at 1.1880. 

GBP’s inability to hold higher levels seems to stem, in part at least, from comments by BoEs Taylor who has said in his first public speech that he thinks we’ll see at least 1% of rate cuts this year and prefers to act pre-emptively to help out the slowing economy. Meanwhile, UK GDP and industrial production data released this morning provided more evidence of the UK economic woes, both coming in lower than expected,

The initial USD weakness sent USDJJPY sharply lower, reaching 156.00 before the reversal which saw the pair back up at 156.70.  Talk overnight of BoJ rate rise next week sent the pair to an overnight low of 155.20, now 155.85.  GBPJPY traded down to 189.80 before trading back up to 190.90 before the weak UK data took its toll.  190.20 as I type.

Romania kept their rate unchanged at 6.5% yesterday as expected.  There had been some looking for a possible rate cut but with inflation still running above the central bank forecasts it was only a very outside chance.  EURRON

Aussie employment overnight was a mixed bag.  The headline employment change came in at a very decent +56.3k but the details show this was due to a large increase in part-time work, with full time employment actually falling by nearly 24k.  AUD initially pushed higher, GBPAUD traded below 1.9600 briefly before reversing over 100 points to just above 1.9700.  Now 1.9625 after the UK data took its toll. 

A six-week ceasefire between Hamas and Israel is set to begin on Sunday which should see the release of hostages held in Gaza, Israeli troops pulling back and aid being allowed in.  Whether this leads to a permanent end to the conflict remains to be seen but it is certainly a step in the right direction.   

In other news, Jeff Bezos’ Blue Origin rocket has launched into orbit in a successful mission, except the booster failed to land on its platform on its return to earth.  Despite the booster failure, this is a big step forward for Bezos.  His company is trailing Musk’s SpaceX, which yesterday launched a rocket carrying two lunar landers.  Its booster did land on back on its floating platform, pretty incredible.

Spurs were unable to pull off any incredible feats last night, losing 2-1 to Arsenal.  They did take the lead but Arsenal dominated for much of the match and Spurs struggled to have any great impact.  Spurs did hit the post late on in the game but the reality is Arsenal could have scored more.  Spurs are 13th in the table and could slip lower this evening if Man Utd beat Southampton.

US retail sales the highlight this afternoon, and UK retail sales will be released early tomorrow morning.  I have a bad feeling about UK sales data and also a bad feeling about GBP in general.  Here’s hoping I’m wrong.

-  12.30 ECB minutes

-  13.30 US retail sales, Philly fed survey, initial jobless claims

-  21.30 NZ business PMI

-  02.00 China GDP, retail sales, industrial production

-  07.00 UK retail sales