Trump tariff talk sends USD higher, CAD and MXN main losers

Good morning

It was a quiet day yesterday as we’d expected, with both a lack of economic data releases and the US Thanksgiving holiday looming.  GBPUSD traded a 50 pips range between 1.2550 and 1.2600, EURUSD saw a wider 1.0450-1.0530 range but there really wasn’t anything to get excited about.  Those pairs ended the London session around 1.2545 and 1.0470 respectively, leaving GBPEUR around 1.1980. 

Overnight we saw a spell of USD buying as Trump announced the sort of tariffs he’d introduce on his first day in office, namely a 10% increase on China tariffs and 25% tariffs on Canada and Mexico.  The latter could possibly contravene the USMCA treaty that was entered into back in July 2020 but as we know Trump doesn’t always worry about such matters.  Anyway, the USD buying led to GBPUSD reaching 1.2505 and EURUSD 1.0425, although those moves didn’t last and as I type we are pretty much back to the levels we saw at the London close. 

CAD is one of the bigger losers, with USDCAD trading from 1.3985 to a high of 1.4170 overnight, highest levels since Apr/May 2020.  USD has held most of those gains, the pair now 1.4140.  Some eyeing the 2016 and 2020 peaks around 1.4670/90 as an outside bet.  USDMXN also spiked higher from 20.30 to 20.75 on the tariff comments.  AUD, a reasonable proxy for China, also weakened, AUDUSD trading down from 0.6505 to 0.6435, while AUDNZD traded below 1.1100 and GBPAUD jumped from 1.9320 to 1.9435.  AUD has since recovered a good portion of those losses mind you.

Yen has bucked the trend, making gains against USD with USDJPY trading as low as 153.55, an area that has been tested, and held, three or four times this week already, as such it is well worth keeping an eye on.  A brief recovery to 154.20 this morning was short-lived, we are now 153.90.  GBPJPY is currently 193.00.

We have heard from several central bank officials recently, not many have added anything new.  However there are some exceptions.  Fed’s Kashkari and Goolsbee sounded pretty dovish, with Kashkari saying a Dec rate cut could be appropriate and Goolsbee saying interest rates have a fair way to go before they reach neutral.  ECB’s Lane was a bit more mixed.  On one hand he sounded very dovish, suggesting the ECB may not need a gradual approach to rate cuts, his use of the word ‘forceful’ suggests he’d happily see a larger cut in December.  On the other hand he also mentioned ECB must act carefully and assess the response of the economy to policy decisions.  Meanwhile ECBs Nagel continues to warn of cutting rates too rapidly.

BoEs Dhingra has said that UK inflation is now more in line with its peers which is good news indeed, adding that US tariffs on China and the rest of the world could offer some downward pressure on UK inflation.  However, if trade wars disrupt global supply chains then it could be a very different story.  Of course there is still the likely inflationary impact of the recent budget to factor in, the BRC is already warning that shops will pass on higher staffing costs to the consumer. 

There isn’t a great deal on the calendar today, US consumer confidence is likely to be of limited interest, while the FOMC minutes this evening may give some clues as to Fed thinking on future rate moves.  The main release comes overnight, where RBNZ will be announcing whether they will be cutting rates 25 or 50bps.  The latter is far more widely expected and as such I’d think pretty much priced in although a dovish statement could push NZD lower, indeed there is an outside chance of a 75bps cut which, if so, could also see a weaker NZD.  GBPNZD is currently 2.15, AUDNZD 1.11 and NZDUSD 0.5840.

Desperately looking for something that will get me a little more active, for the last few weeks I’ve been playing Pickleball with the family.  I don’t know if you’re familiar with the sport, I think it’s the fastest growing sport in the US and having played it I can see why.  It’s played on a badminton-sized court,  very simple, not unbearably strenuous but you certainly know you’ve done an hour of activity.  Good fun as well, and at the moment it works despite slightly different fitness and ability levels.  Worth a go if you’re into that sort of thing.

Have a great day

-  14.00 US house price index

-  15.00 US consumer confidence, new home sales

-  19.00 FOMC minutes

-  00.30 AUS CPI

-  01.00 RBNZ rate announcement

-  02.00 RBNZ press conference

Slow start to Thanksgiving week

Good morning

Friday was another day of US dollar strength, a combination of risk-off for European countries over Ukraine and also weaker EU and UK PMI’s, but stronger US PMI’s helped support the USD.  GBPUSD traded to a low around 1.2485, EURUSD 1.0330 although both were off the lows into the weekly close.  Since the open we have seen a slightly softer USD, GBPUSD just breached 1.26 and EURUSD just broke 1.05 although both are off those highs now, at 1.2555 and 1.0455 respectively.  GBPEUR is 1.2005.

US Thanksgiving this Thursday, and Friday, the original black Friday, is pretty much a non-day as well, this can give a real holiday feel to the whole week although Wednesday does bring a host of US data including GDP and PCE, plus of course we have the ongoing geopolitical risks to contend with, so it might be a bit early to say ‘sit back and enjoy the rest’.  

Once the German IFO is out of the way this morning, todays calendar has little to offer other than a few central bank speakers.  Whether this means the markets will remain calm is another matter of course.

Not sure what weather you got over the weekend, I know some areas were hit quite badly by Storm Bert, we seemed to get away with it in the whole, just some very strong gusts and intermittent rain was all we had to contend with.  It was actually pretty useful, taking most of the remaining leaves off the trees and still being decent enough for me to get out and gather them up.  It’s not quite the end of it, but we’re not far off now.

I do have to mention Spurs, an incredible 4-0 victory over Man City was the highlight of the weekend although Mark will be very cross if I don’t mention the fact that Leeds Utd are now top of the Championship after a late win over Swansea yesterday.   England’s rugby team finish the Autumn Nation Series with a win, beating Japan and scoring nine tries in the process.  Small consolation after some disappointing results but hey, we’ll take the win. 

Congratulations to Max Verstappen for winning his fourth consecutive F1 drivers title.  It was closer than some has expected, the Red Bulls are nowhere near as dominant as in previous seasons, currently in third place in the constructors championship with just two races to go. 

I had one thing to really do over the weekend and I have to say I failed.  I tried to see Wicked at the cinema but had underestimated its popularity and there were no decent seats at decent times so I’ll have to wait a bit for that.  Its pretty good by all accounts. 

Anyway, one month until Christmas, I don’t feel particularly prepared, and while there is still plenty of time we all know how quickly that can pass.  What better time to start shopping than black Friday…….

Have a great day

-  09.00 German IFO

-  09.00 BoEs Lombardelli speaks

-  10.30 BoEs Dhingra speaks

-  16.30 ECBs Lane speaks

-  17.30 ECBs Nagel speaks

EUR lower after disappointing PMI data, USD on a high

Good morning

A late flurry of USD buying yesterday sent GBPUSD to six month lows and EURUSD to one year lows of 1.2575 and 1.0460 respectively, some suggestion the move was a safe haven play moving money away from Europe after Russia used a new hypersonic missile in Ukraine, pretty scary and a deliberate show of force by Russia after Western weapons were fired into Russia by Ukraine.  US responds with sanctions on Gazprombank.

EURUSD tested that 1.0460 area again this morning, while GBPUSD sank to 1.2550 as weaker than expected retail sales data hit the wires.  They hadn’t been expected to be good to start with, but they failed to meet even those forecasts and with downward revisions to the previous month GBP had to fall. 

Since then EUR has lost further ground after very disappointing EU PMI data was released.  EURUSD has broken below key support at 1.0440 and on to the 2017 lows of 1.0340.  EUR has lost ground against GBP as well, GBPEUR now up at 1.2090.  At the same time GBP has also struggled against USD, GBPUSD trading briefly below 1.2500, perhaps concerns over the UK’s own PMI release at 9.30 to blame. 

CHF, another traditional safe haven did push higher as well, GBPCHF traded down to support around 1.1120, and GBPJPY traded down to 193.35 as Yen caught a bit of buying as well.  Bitcoin has bucked the stronger US dollar trend, moving just $500 or so short of $100,000.  Indeed I have to say I do wonder whether Bitcoin is indeed becoming something of safe haven, not suffering the sort of painful forward points or cost of carry that comes with buying gold or yen. 

AUDNZD broke higher again, reaching 1.1175, the highest level for just over two years, although it has since dropped back to 1.1125.  Divergence between RBA and RBNZ policy still the driving force here.

Its noticeably warmer today, we’re above zero at least.  We’re still forecast wind and rain tomorrow but perhaps not quite as bad as we’d been warned earl;ier in the week.

Plenty to look forward to this weekend, the Premier League returns, the highlight being Spurs v Man City tomorrow, although Arsenal v Notts Forest could be interesting given the two teams are currently on the same points as each other.  Englands rugby team take on Japan on Sunday, England hoping to end their losing streak.  And F1 returns after a break, Las Vegas is the venue.  I’d love to be there.

Still, I have to say, and I know I’ll get a bit laughed at here, but I’m more excited about the release of the film ‘Wicked’.  It’s a fantastic musical, one of my favourites, and I’m keen to see what it will be like at the cinema.  I’m prepared for disappointment but it’s a great story and really great music.  If you;ve not seen it, I’d recommend it, but the theatre show will no doubt be better than the film.  I’ll let you know!

Sunday night we’ll have the latest NZ trade balance and retail sales.  Next week is US Thanksgiving which generally wipes out Thursday and Friday.  The calendar for data is pretty full on Wednesday with US GDP and core PCE among others.

For now, PMIs are the focus and they’re not looking good…..

Have a great weekend

-  09.00 EU manufacturing, services PMI

-  09.30 UK S&P manufacturing, services PMI

-  12.40 SNBs Schlegel speaks

-  13.00 ECBs Nagel, Villeroy speak

-  13.30 CAD retail sales

-  14.45 US S&P manufacturing, services PMI

-  15.00 US Michigan sentiment survey

-  15.40 BoEs Greene speaks

-  15.45 ECBs Schnabel speaks