USD lower into month end, Yen makes gains

Good morning

Yesterday was pretty quiet although perhaps not as quiet as we’d expected.  USD saw further weakening, with GBPUSD trading up from 1.2650 to 1.2700 and EURUSD also traded higher to 1.0575.  Both pairs took another leg higher this morning, GBPUSD reaching 1.2750 and EURUSD 1.0595 but this was short-lived and we are now back to those 1.2700 and 1.0565 areas.  This leaves GBPEUR at 1.2020 having peaked at 1.2040.

The big moves is Yen.  This morning USDJPY traded below 150 for the first time in over a month, reaching 149.50 before recovering to 150.15 where we currently trade.  Higher than expected Tokyo inflation overnight plus further talk of BoJ rate rise in December seems responsible for the move, helped by an already weaker USD. 

AUDNZD is down at 1.1000 which I find a bit strange given RBNZ remain dovish, another 50bps cut in February is likely, while Aussie rates remain on hold and could well do so until May next year.  RBA are actually undergoing a major overhaul, splitting interest rate setting and governance into two separate committees.  There is uncertainty as to who will sit on the rate policy board so it is likely to become harder to forecast rates.

EU inflation numbers out this morning, always worth watching but rarely move the market to any great extent.  ECBs Villeroy has said there is still signifiocnat room for ECB to cut rates.  Of more interest perhaps is the fact that French bond yields are now higher than those of Greece, something the FT have highlighted.  How French borrowing costs can be higher the those for Greece is really quite alarming.  Political woes in France to blame, as Barnier does what he can to avoid a collapse of his government that is only a few months old, including a promise not to raise electricity prices, a key demand of Le Pen’s National Rally. 

Spurs drew with Roma last night, it looked as though they may just cling on to their slim lead but Roma had so many chances it seemed only a matter of time until they equalised, and they duly did with just seconds left on the clock.  Spurs really must take chances when they get them.  Man Utd gave new manager Amorim his first win with victory over Bodo/Glimt. 

Spurs take on Fulham at the weekend, Chelsea v Aston Villa could be good but the highlight should be Liverpool v Man City on Sunday.  Two great teams with very different run of form, Liverpool flying and Man City facing a fourth straight Premier League loss. 

England’s cricket team are putting up a decent fight down in New Zealand.  The Kiwis were all out for 348 and by the end of day two England were just 29 runs behind with five wickets still remaining.  Could be exciting but not enough  to get me out of bed in the middle of the night!

By the time you receive my next report we’ll be in December, indeed Christmas will be just over three weeks away.  There are still some thinking it’ll be calm from here but I’m not so sure.,  Next week brings US employment numbers and PMIs, the following week brings rate announcements from RBA, BoC, SNB, ECB as well as US inflation, the next week will be no easier with PMIs, UK inflation and both BoE and FOMC rate announcements and US PCE and GDP.  All that while we’re hoping Putin doesn’t escalate his attacks Ukraine, which unfortunately at the moment looks more than possible.

So, enjoy the weekend as and when it comes, it looks like it should be a bit milder over the next few days.  Black Friday sales are well and truly here, fortunately they now last longer than just one day but somehow most things I look at are actually not one of the items on sale.  Still not pulled the trigger on the car insurance, although have got it down to a bargain £2,200 so far. Yikes. 

Have a great day

-  10.00 EU HICP

-  10.03 UK BoE financial stability report

-  11.30 ECBs de Guindos speaks

-  12.00 INR GDP

-  13.00 ECBs Nagel speaks

-  13.30 CAD GDP

USD a touch lower into Thanksgiving

Good morning

Both US GDP and Core PCE came in at 2.8% yesterday as had been expected.  There is a risk that Q4 PCE will be higher than the Feds forecast which may explain the recent comments from Fed officials about uncertainty as to where neutral rates are.  Despite this we saw gradual USD weakness through the day which pushed GBPUSD up to a high of 1.2690, EURUSD to 1.0585 and USDJPY hit 150.50, not far off some 500 points lower than this time last week.   There

French stocks underperformed as PM Barnier looks to pass a budget with EUR60bn of spending cuts and tax increases.  He doesn’t have the parliamentary majority needed but has said he will look to override that.  His actions could bring about a confidence vote that could bring down his government.  This comes after reports that Germany will breach spending limits.  Meanwhile Lagarde urges Europe to negotiate with Trump on tariffs, rather than retaliate with their own.   

ZAR was a notable loser yesterday, USDZAR had been down at 18.07 in the morning and as I type is trading up at 18.26, similarly GBPZAR was down at 22.78 this time yesterday and now trades around 23.10.  There doesn’t seem much behind the move, even some of the bigger banks are unable to offer a suitable explanation, particularly as the move comes as manufacturing confidence actually hits a two year high.

The Mexican Peso has recovered after Trump tariff comments caused losses earlier in the week.  The turnaround came after Trump posted on social media that he’d had a wonderful conversation with Mexican President Sheinbaum, proving once again how Trump can create volatility in the markets.  USDMXN traded down to 20.30 from a high around 20.83.

RBNZs Silk sounded a little more on the hawkish side that RBNZ Gov Orr did recently, first confirming there was no case for a 75bps rate cut and then adding that RBNZ may introduce pauses into its rate cut cycle.  A 50bps cut is still expected in February but after that it seems likely cuts will be smaller.  A bit early to tell whether they will look to pause at all through 2025.  NZDUSD currently 0.5890, with AUDNZD and GBPNZD at 1.1025 and 2.1475 respectively.

Russia launches more large missile and drone attacks on Ukraine, targeting its energy network.  Russia do seem to be increasing attacks and are reported to be successful in taking large areas on the ground.  German intelligence head has said there is a risk Russia will, at some point, attack a NATO member to see whether NATO really does regard an attack on one member as an attack on all members.  He also added that Russia are already attacking the West with acts of sabotage and disrupting Western satellites.  There is also a suggestion that Russia was behind the alleged cable damage cause recently when a Chinese ship dragged its anchor for 160km along the sea bed.

In sport, Liverpool put on a good show against Real Madrid yesterday, winning 2-0 in a pretty dominant display.  The main action comes this evening of course as Spurs take on Ranieri’s Roma.  Roma are struggling in mid-table in Seria A with three losses in a row, although whether Spurs can recreate the form we saw against Man City is very much an unknown.  Fingers crossed.  Meanwhile in cricket, England are played New Zealand in Christchurch, with NZ finishing the first day on 319/8.

Its pretty cold here, we had a heavy frost overnight and temperatures are still around zero.  They may climb to a heady 4°c through the day but it does look like warming up heading into the weekend.  Cold, but not too bad.  Certainly not as bad as in the US, where an Arctic outbreak could see temperatures down to -40°c in some parts and heavy snow fall is threatened.  This has affected travel plans for many over the Thanksgiving holidays.

The US holiday today and a shortened US day tomorrow could well lead to quieter markets, tomorrow does bring the latest EU inflation numbers but I’m reasonably confident we’ll see little movement for a few days.  There has been years where the US Thanksgiving really spelled the end of normal markets all the way to the New Year but something tells me now is not the time to take our eyes off the ball.

Have a great day, stay warm!

-  10.00 EU consumer confidence

-  13.00 German HICP

-  17.00 ECBs Lane speaks

-  00.30 Japan Tokyo CPI

-  00.50 Japan retail trade

-  07.00 UK BoE financial stability report

Israel-Hezbollah peace deal brings some calm, lower oil prices ahead of US holidays

Good morning

More of the same yesterday, a bit of a US dollar move, this time sending USD lower,  which took GBPUSD up gradually from 1.2550 to 1.2615 and EURUSD from 1.0475 to 1.0545, but by the London close we were back at those starting levels and if you’d been out of the office between 9am and 5pm you’d not have noticed much difference. 

FOMC minutes showed the Fed still have a desire to gradually lower rates but there is uncertainty as to where ‘neutral’ rates are.  This makes life difficult on many fronts, Goolsbee said that it makes sense to slow the pace of cuts as rates approach neutral, but if they don’t know where neutral is then it all becomes a little tricky.

In the EU, fiscal rules may be under some threat as it transpires Germany, together with Finland, Estonia and Ireland are not fully in line with spending allowances. 

Overnight we’ve seen a generally weaker US dollar, GBPUSD is back up at 1.2600, EURUSD 1.0510 and USDJPY is 151.60 as I type, talk of a Dec rate rise still doing the rounds.  News of a ceasefire between Israel and Hezbollah sent oil prices lower with both WTI and Brent moving down around 4% from the week’s highs.  Attention will now turn to Hamas and whether a deal can be struck there.

RBNZ did indeed cut rates 50bps overnight, NZD did rally initially, perhaps down to position unwinds from those looking for a more aggressive 75bps cut.  However NZD lost some of those gains as Orr signalled a further 50bps is likely at their next meeting in February, with their rate outlook into 2025 and 2026 lower than previously forecast.  Orr acknowledged that Feb is some way off and made it clear they could always change policy mid-meetings if necessary.  NZDUSD is currently 0.8900, GBPNZD down to 2.1370 and AUDNZD is sharply lower at 1.1015, the latter helped a little by slightly lower than expected Aussie CPI data.

Arsenal and City played in the Champions League last night, Arsenal had a solid victory but Man City’s woes continue as they squander a 3-0 lead to end up drawing 3-3.  This evening Aston Villa take on Juventus, but the big match will be Liverpool v Real Madrid. 

Today brings a host of US data including GDP and the Core PCE inflation reading, both of which do have market moving potential.  With many Americans looking to get out of work early today ahead of Thanksgiving, there is a hope the numbers will be as expected and lead to little or no change.  Thursday and Friday are quite likely to be non-events although we’ve been doing this far too long to think we can just put our feet up and close our eyes. 

I’m getting emails galore about Black Friday sales and deals offering 50, 60 or even 70% off.  All very tempting, I currently have my eye on a set of golf clubs that look like decent value.  However, my youngest passed his driving test yesterday and I’m looking at insurance prices for him, I can assure you there are no Black Friday deals to be found.

Sorry this arrived a bit late.  Have a great day and to our US readers, I hope you do get out early and enjoy safe travels and a wonderful Thanksgiving break.

-  13.30 US GDP, core PCE, durable goods, initial jobless claims

-  14.45 US Chicago PMI

-  15.00 US pending home sales

-  18.00 ECBs Lane speaks

-  18.00 BoEs Pill speaks