Markets lacking any clear direction

Good morning

GBP was reasonably stable yesterday, GBPUSD traded in a 50 pip range between 1.2640 and 1.2690 for much of the day while GBPEUR had a brief 30 pip dip in the afternoon but recovered to the 1.2060.  GBPUSD had traded towards the top of that range this morning but has been dragged back down to the 1.2635 area as I type, while EUR is still struggling to shrug off both the French political situation and some weaker than hoped PMIs this morning, pulling EURUSD down to 1.0485.  ECBs Nagel has said he expects 2025 to be another year of low growth for Germany.  GBPEUR currently 1.2055 having tested up to 1.2080 this morning. 

US JOLTS jobs data yesterday was a touch on the firmer side which gave USD a bit of support in the afternoon, todays brings ADP which some say gives an indication of nonfarms although in my mind it is generally an unreliable indicator.  Feds officials speaking yesterday erred on the dovish side, with Goolsbee saying that rates should drop a fair amount, and Kugler saying neutral rates are around 3%.  Daly was a little less dovish, saying a Dec rate cut is not out of the question but that jobs, growth and inflation are all in a good place.  She is not in a rush to cut rates.

USDJPY climbed almost 200 pips from its lows yesterday of 148.65 to 150.55, now 150.35.  The recent talk of a Dec rate rise has been diluted after news reports of BoJ concerns about a political response to such a move.  GBPJPY traded up to 191.00, now 190.40.

Aussie GDP disappointed overnight, sending AUD running for cover, GBPAUD bounced from 1.9540 to 1.9740 and after a brief retracement to 1.9685 it has headed back up to those highs.  AUDUSD is at four month lows, now 0.6430 while AUDNZD trades back towards support at 1.0980.  Markets are already adjusting their RBA rate forecasts, now pricing in a cut in April.

A trade war between US and China is looming, with China retaliating over US chip controls by announcing export controls of its own on certain minerals that are used by the US in weapon production.  The US are not happy.  Meanwhile China have announced that US chips are no longer safe and firms should use locally produced chips instead.

Odd goings-on in Korea, where President Yoon surprised by declaring emergency martial law to rid the government opposition of North Korean elements that he says are acting to destabilise the country.  The martial law was voted down and revoked quickly, the opposition suggesting that Yoon is acting to serve only his own political interests and has nothing to do with North Korea.  Yoon is excepted to face impeachment today.  Korean markets all over the place as you’d imagine, KOSPI fell sharply, recovered, and is now back near its lows, while USDKRW traded up to 1,429 having ended last week around 1,395, now 1,414.

Meanwhile in Georgia, pro-EU demonstrations continue after the ruling party last week announced it was halting the country’s bid to start talks on joining the EU.  Plenty of talk of police brutality, with riot police using water cannon and tear gas.  Of course, the main talk is of Russian influence in the decision as Georgia seems to be fighting for a future based on Western or Russia values. 

All in all a pretty gloomy outlook.  I’ll try to cheer things up tomorrow.

Have a great day

-  09.00 EU composite PMIs

-  10.00 EU PPI

-  13.15 US ADP employment change

-  13.30 ECBs Lagarde, Cipollone speak

-  13.45 Feds Musalem speaks

-  14.45 US S&P composite PMI

-  15.00 US services ISM

-  15.30 ECBs Lagarde speaks

-  17.10 ECBs Nagel speaks

-  18.45 Feds Powell speaks

-  19.00 Feds beige book

-  23.00 Feds Daly speaks

-  00.30 AUS trade balance

USD mixed ahead of key week for US employment data

Good morning

A good day for the US dollar yesterday, pushing higher against both GBP and USD.  It was all pretty stable through the morning but come the afternoon we saw some persistent USD buying that took GBPUSD and EURUSD down from 1.2720 to 1.2620 and 1.0535 to 1.0460, helped along the way by better than expected US ISM numbers.  Some focus on US interest rates with markets 50/50 on a Dec cut and only three cuts being priced in for 2025, although the usually more hawkish Fed member Waller did say yesterday he’d support a Dec cut barring any data surprises.  .

By the London close some of those USD gains had been reversed and this morning we’ve seen further USD selling which takes GBPUSD back up to 1.2675 and EURUSD to 1.0505, perhaps people are paying more attention to those comments from Waller.  GBPEUR is up at 1.2065, it had reached 1.2090 yesterday and with UK rates path continually higher than ECB rates, and with the French political chaos, the pair is likely to be supported.

Yen bucked that strong USD trend though, USDJPY traded lower to 149.25 which meant GBPJPY slipped through the support I mentioned yesterday and down to a low of 188.50.  We’ve since seen a reversal, USDJPY is just back above 150 and with GBP recovering, GBPJPY is now 190.35.  There was some talk that GPIF, the Japanese government pension investment fund, may aim to push more holding towards domestic which should ultimately result in buying Yen against  overseas currencies.  Nothing is always that straightforward though, the increased domestic stock allocations are not confirmed although Nikkei did rally 2% yesterday, perhaps led by the allocation thinking. 

In France, Barnier used special constitutional powers to push through his budget despite the opposition from both left and right wings.  A confidence vote is likely to take place as early as Wednesday.  Perhaps that unchanged stable rating by S&P was a bit premature.

Turkish inflation, released this morning, was lower than last month but at 47.10% is still higher than had been expected and really quite a frightening number.  TRY continues to weaken with USDTRY up at 34.74, although EURTRY and GBPTRY are off their September highs, now 36.50 and 44.00 respectively. 

In other news, Police in Australia have seized a huge haul of cocaine, some 2.3 tonnes with a street value of nearly £400m.  It came from a boat that had broken down off the coast of Queensland.  That is quite an incredible sum of money, the drug dealers behind it will not be at all happy.  I wonder how much of a dent that puts in their operation or is it considered just a risk of the trade?

Speaking of large sums of money, Elon Musk won’t be happy that a judge has ruled against his US$56bn pay award from Tesla.  The award had been approved by both the board and the shareholders back in June after a Delaware court had stopped the payment back, however it seems to have made its way back to court where the judge upheld her original decision.  It is a ridiculous amount of money but I have to agree with Musk that shareholders should control company voting, not judges. 

Today we have the US JOLTS job data, the first employment number of the week that also brings ADP tomorrow, Challenger Thursday and the highlight, the nonfarms on Friday.  These numbers are fairly crucial to the Dec FOMC decision so plenty of market moving potential although as much as we look at the secondary data, it is really the nonfarms that is the key.   

More Fed officials speaking today, the Feds blackout period before the 18th Dec FOMC decision begins this weekend so they’ll be trying to get their bit in before that starts.  Aussie GDP overnight is expected to show a smidge of growth, for the record GBPAUD is currently 1.9515.

That’s all for now folks, have a great day

-  15.00 US JOLTS job openings

-  16.00 RBNZ Gov Orr speaks

-  17.35 Feds Kugler speaks

-  20.45 Feds Goolsbee speaks

-  00.30 AUD GDP

-  01.45 China caixin services PMI

USD begins December on a firmer footing after Trump comments

Good morning

Welcome to December. 

The US dollar ended the week, and indeed the month, on a softer note with GBPUSD and EURUSD trading up to 1.2745 and 1.0585 respectively.  Trump’s comments over the weekend, where he talked of harsh tariffs on BRICS nations who may look to replace USD as the reserve currency, sent USD higher, GBPUSD trading down to 1.2680 and EURUSD to 1.0495. 

GBPEUR is currently 1.2080, not far off the November highs.  Not a bad rally from GBP given the pair was around 1.1950 just last week.  EUR under some pressure from the French political situation, with Barnier possibly poised to make further concessions to Le Pen’s demands in order to avoid a collapse of his government.  However I see S&P have held France’s rating, you will recall Fitch lowered their outlook for France to negative in mid-October. 

With UK rates still well above ECB rates, it is easy to see why GBPEUR is near those highs although Bloomberg have reported that Reeves is at risk of breaking her own fiscal rules and could be forced into a mini-budget after OBR delivers its economic update in Spring.  A bit of a gloomy outlook.

USDJPY, which had been as low as 149.45 late last week, pushed up to 150.75 earlier this morning although as I type it is back at 150.20.  GBPJPY is currently 190.60 having found support around 190.15/20, we’ve not been below 190.00 since the very start of October so well worth keeping an eye on the downside.  Talk remains of a possible rate rise at the next BoJ meeting on 19th Dec.

This is an important couple of weeks for USD as we head into the year-end, with some major data and another FOMC rate decision coming up in the coming weeks.  This week brings US employment numbers and ISM PMI’s.  At the moment, expectations are for US nonfarm employment numbers to recover after last months dire +18k headline, the thinking is that this was impacted by weather and we could be in for a bounce to +180k or so.  More on that nearer the time.

In Ukraine, there has been some suggestion that Zelensky could concede land that Russia has taken in order to agree a ceasefire.  This could explain the latest push by Russia to take s much land as is possible.  Whether either side will really find a suitable compromise remains to be seen, Putin won’t like Ukraine’s idea that NATO can provide security for the remainder of Ukraine, while he will also be a bit more confident in Russian abilities after the success in land grabs and the recent missile strikes. 

In Syria, rebels have struck against the Assad regime with devastating efficiency and now control most of Aleppo.  I don’t really understand whose side we are on here.  I don’t think we like Assad, he’s friendly with the Russians I think but there is a suggestion that the rebels have connections with ISIS.  Given the choice, I’d take Assad.  It’s a complex situation.

In other news, Biden has granted his son a full and unconditional pardon for his tax evasion, gun and drug charges.  Great to have parents in high places, but quite how that is allowed is really beyond me.  Meanwhile Gregg Wallace fights back against his accusers.  I don’t really know what to make of this, in a way I feel a bit sorry for him, it seems as though he has made some outdated and inappropriate comments that perhaps don’t deserve the attention they are getting, however my wife has never liked him and she is normally an excellent judge of character.   

In sport, Spurs failed to recreate their form shown against Man City, managing just a draw with Fulham.  Liverpool extend their lead at the top of the table with a win over Man City, Arsenal and Chelsea some nine points behind the leaders.  Man Utd had a solid 4-0 victory over Everton, the first Premier League win for new manager Amorim.   Mark always tells me off for failing to mention Leeds but I’ll keep quiet today given they lost 1-0 to Blackburn on Saturday.  In cricket, England won the first test against New Zealand by eight wickets after a decent all-round performance.  The next test begins Thursday. 

It’s a little warmer now than it was a few days ago and it looks as though we’ll be away from zero for the next couple of weeks at least.   Quite sunny out at the moment as well, at this rate a white Christmas will be out of the questions.

Have a great day

-  10.00 EU unemployment

-  14.30 CAD S&P manufacturing PMI

-  15.00 US manufacturing ISM

-  20.15 Feds Waller speaks

-  21.30 Feds Williams speaks

-  00.01 UK BRC retail sales