USD holds gains, this week brings inflation releases and PMIs

Good morning

I hope you had a great weekend.  Have to say it was pretty decent, it was a lot warmer than I’d feared, with some sunny spells which made it feel positively warm, enough for me to shift the leaves and walk the dog in shorts.  Its not quite as nice now, looks like we have a day of wet weather ahead and as we move further on in the week we’ll have some lower temperatures.  We don’t have any of the snow and ice that some areas have been forecast to get.   

The US dollar ended last week on a high against GBP, GBPUSD having been as low as 1.2595 late on Friday.  The pair did push up to 1.2640 in the early hours of this morning but as I type we are 1.2625, some 300 points lower than around this time last week.  EURUSD is also lower than it started last week, now 1.0550 having dipped very  briefly below 1.0500 on Thursday.  GBP is lower against EUR having seen a high above 1.2100 last Monday , we are currently testing last week’s lows around 1.1965.

USDJPY is well of its highs of 156.75 last week, now 154.80 but it did trade as low as 153.80 late Friday and again this morning.  The Ueda press conference this morning, which had been announced at quite short notice, failed to give any firm guidance as to rate moves in December, preferring instead to fall back on the ‘depends on the state of the economy at each meeting’ theme.  The balanced tone disappointed those looking for possible rate rises next month.   

US has allowed Ukraine to use American long-range weapons to strike deep inside Russian territory for the first time.  We’ve not heard from Putin on the matter but already Russian officials have called it a ‘very big step towards world war three’.  The move comes as Russian launched huge drone and missile attacks on Ukraine over the weekend.  Gold pushed up from last week’s lows around US$2,537 up to almost $2,600.

England’s football team had a solid victory over Republic of Ireland yesterday, winning 5-0 and topping the group as a result.  This was Carsley’s last match as interim manager, Thomas Tuchel takes over at the start of the year, inheriting a squad of pretty excellent, young players with whom he is hoping to challenge for the World Cup in 2026.   Exciting times ahead, we hope.

England’s cricketers lost the fourth T20 match against West Indies, their first loss in the series having reached an unassailable 3-0 lead.  The final match was washed out after heavy rain.  A win in the T20 series after defeat in the ODI series.

In rugby, England lost to South Africa, having recently lost to New Zealand and Australia.  Disappointing, particularly as England did seem to have chances to win all three.  It hasn’t been a great run, England will hope to return to winning ways against Japan next Sunday.

The big sporting event of the weekend was the boxing match between Jake Paul and Mike Tyson.  Tyson lost on points but it was difficult to know whether both were really trying.  Tyson, at 58, did well to last the eight round match, some say he shouldn’t have fought at all, others think he was deliberately restrained.  Similarly, Jake Paul, a youtuber who has turned to boxing, is clearly a decent fighter and some think he could have knocked out Tyson in the later rounds had he chosen to do so.  Anyway, whatever your views, the bout was watched by some 60 million households and possibly would have been more had Netflix not crashed several times due to the number of people tuning in.  A success for ‘free’ boxing on tv.  Well, free if you subscribe to Netflix that is.

We’ve had a reasonably calm start to the week, particularly when we consider the escalation in the Ukraine/Russia conflict.  Central bank officials on the calendar today but the week belongs to inflation releases, with latest data from EU, Canada, UK and Japan all out this week.  We will also have UK retail sales as well as EU, UK and US PMIs.  Not the biggest week perhaps but certainly enough to keep us on our toes.

Have a great day

-  13.00 ECBs Lane speaks

-  15.00 Feds Goolsbee speaks

-  18.30 ECBs Lagarde speaks

-  18.30 BoEs Greene speaks

-  00.30 RBA minutes

Fed's Powell keeps USD near the week's highs on rate cut doubts

Good morning

Here we are, already in the middle of November.  I just have no idea how this year is going by so quickly.  Time flies when you’re having fun I guess!

We had a bit of a rollercoaster day yesterday.  The US dollar pushed higher initially with GBPUSD reaching 1.2630 and EURUSD breaching 1.0500 by a handful of pips.  These moves reversed through the afternoon with some decent USD selling, by the London close we had reached highs of 1.2720 and 1.0580.  GBPEUR was stable throughout the session, holding within a few pips either side of 1.2025.

This weakness in the USD was all the more interesting given it came despite US PPI coming out not only firmer than expected but also with upward revisions to the previous month. The data did actually stem the USD selling for a few minutes, but the theme continued thereafter.   

Fed’s Powell then caused yet another reversal in the US dollar, his rather hawkish comments led some to even questions whether we’d see a rate cut at all from the Fed in December.  Powell’s focus seemed to be more on inflation than the labour market, making it clear that the battle on inflation could be damaged if rates are cut too quickly, although adding that the Fed risk harming employment and the economy if they keep rates too high.  Powell, and other Fed officials such as Kugler and Barkin, all mentioned the resilience of the labour markets.  They will be in no hurry to cut rates, odds on a Dewc move are now around 50/50.. 

After Powell, GBPUSD traded back down to the mid-1.26s, EURUSD to around 1.0515, not quite hitting the lows seen earlier in the day but certainly reflective of the potentially slower Fed easing.

BoEs Bailey was also speaking yesterday evening.  He spoke less on policy, more on general trade matters, urging the UK to not respond to tariffs from other countries with tariffs of our own.  He also said he endorsed Reeves investment plans for the UK.  Both Bailey and Reeves have called for UK to rebuild ties with EU ahead of the possible introduction of US tariffs on both European areas.  Reeves did confirm her plans to reform local government pension funds into ‘mega-funds’ which could be used to boost growth. 

This morning, UK GDP was disappointing, with Q3 GDP coming in at just 0.1%, lower than expectations which were already pretty dismal.  Some are blaming the uncertainty ahead of the election.  GBP shifted a touch lower on the announcment.   

USDJPY hit as high as 156.75 overnight, some 400 pips higher than the start of the week, but comments from Japan’s Kato about excessive Yen moves plus the announcement of a BoJ press conference on Monday were enough to turn the tide a little, USDJPY trading down to 155.60.  There is some feeling the Ueda will take the opportunity to talk about Yen weakness although it has been noted that an address by the BoJ governor is not uncommon around this time of year. 

CAD has weakened against USD, no great surprise given that most other major currencies have shared the same fate, but for CAD I think it is slightly different.  USDCAD is now 1.4060, the highest level since May 2020 when Covid was having huge market impact.  Goldmans have said they now look for a BoC rate cut of 50bps in December, from 25bps previously. 

Gold had traded down to US$2,540 yesterday morning, not far off 10% down from the historic highs seen at the end of October and the lowest level for two months.  The late USD selling did drag gold back up to $2,575, still supported by the ongoing Middle East conflict and of course from the ongoing buying by China, and now perhaps by other BRICS countries as well.     

England football team looked more convincing yesterday evening as they beat Greece 3-0, the goal difference enough to put England on top of their group B league.  England play again on Sunday, taking on Republic of Ireland.  England’s cricket team have won the latest T20 match against the West Indies, giving them an unassailable 3-0 lead in the series of five matches.  They play again tomorrow.   

Meanwhile Englands rugby team face South Africa tomorrow.  After being beaten by both New Zealand and Australia, I can’t say I’m hopeful against the reigning world champions.  The bookies have the Springboks as odds-on favourites which is no great surprise. 

One of the more intriguing sporting fixtures takes place in the early hours of Saturday morning.  Mike Tyson takes on Jake Paul in a heavyweight boxing match.  Tyson is 58 years old and in incredible shape ahead of the match, Jake Paul started out as a YouTuber but has gained serious boxing credentials over the past few years.   Really difficult to see how this is going to go.  Paul is younger and must surely be fitter, while Tyson is a seasoned professional although of course his age makes us question whether he really should be getting back into the ring at all.  Both will earn good money, somewhere between $20 and 40 million each, so you’d think neither will be too upset if they lose.   But that is not how boxing works.  Both are out for blood.  Unless of course it has been agreed to stretch the match out to please the vast number of viewers who will be watching it on Netflix.

I’m thinking today may be a little calmer than the last few days although US retail sales this afternoon may well push USD around again.  As I type GBPUSD is 1.2665, EURUSD 1.0570, which leaves GBPEUR back below 1.2000 after the GDP release, now 1.1980.

Have a great weekend, it should be a dry one.  It won’t be too warm but it will certainly be warmer than next week when we’re expected to get overnight temperatures below zero for the first time in, well, I don’t know how long.  No surprise that I’ll be clearing more leaves, although there are noticeably less left on the tree now so perhaps my work there is nearly done. 

-  13.30 US retail sales, NY empire state manufacturing index

-  14.00 Feds Collins speaks

-  14.15 US industrial production

-  15.00 ECBs Lane speaks

-  15.15 ECBs Cipollone speaks

-  18.15 Feds Williams speaks

USD holds gains as Fed officials sound cautious on rate cuts

Good morning

A bit of an odd day yesterday, we had the US inflation numbers which were stronger than last month but in line with expectations and had little overall impact initially, but once again the late afternoon was occupied with USD buying which took GBPUSD to 1.2685 and EURUSD to 1.0555.  This time it was EUR that was worse off, with GBPEUR moving up from its lows around 1.1985 to 1.2030.

Overnight the currency markets have been generally quiet, as I type GBPEUR is still 1.2685, EURUSD 1.0550 and as such GBPEUR is 1.2025.  USDJPY did hit a high of 165.10 overnight, now 155.80, once again verbal intervention is limited. 

Trump now has a governing ‘trifecta’, that is when the Presidents party also controls both chambers of Congress, the House of Representatives and the Senate which will give him a smoother path for him to pass new policies. It doesn’t mean he can have it all his own way, but life will certainly be easier for him.  Plenty of talk of new tariffs, not just on China but on all imports to the US, including those from UK and EU. Trump is in the process of making key appointments which, on the face of it, suggest this really will be a Presidency designed to shake things up

The is ongoing talk in the UK that the recent budget will lead to price inflation for consumers.  Both the head of JD Sports and the head of hospitality firm Fullers yesterday warned of higher pricing unless the government changes its plans and phases in the NI increases over two or three years to allow firms to gradually absorb the tax rise rather than hit firms in one go.  I don’t think the government will change its mind, it will be a pretty bad show if they have to u-turn so quickly.  Still, the increases don’t come in until next April so there is still time, I’m sure they could put a good spin on the change as well. 

Meanwhile, UK Chancellor Reeves is expected to announce plans for pension reforms, seeking to free up some £80bn for investment by consolidating UK council pensions into just a few mega-funds.  We await her speech later to see what details we get of the plan.

Fed officials were speaking yesterday, Musalem said that rates could continue to fall gradually if inflation continues to head lower but both he and Schmid sounded more cautious on rate cuts, highlighting upside risks to inflation and a labour market that appears to be deteriorating less than had been feared.

Overnight Aussie employment and inflation expectations were released, both marginally on the weaker side.  AUDUSD had traded below 0.6500 yesterday for the first time since August, and has held below that level since then, reaching a low of 0.6460.  Of course, this is in the background or a stronger US dollar, but AUD remains weak against GBP with GBPAUD currently around 1.9600, although AUD is of its recent lows against NZD, now 1.1035.  The weaker data hasn’t brought any change to rate expectations from RBA, there is still no rate cut expected until at least Feb next year at the earliest.

England’s footballers take on Greece this evening in the next UEFA Nations League match.  It will be difficult, Greece beat England just over a month ago for the first time ever and will be boosted by the news that many of the England team have pulled out of the squad citing injuries.   In cricket, England will be looking to build on their recent T20 win as they take on West Indies in their next match this evening.  It has so far been a disappointing tour, with a few very bright spells  combined with plenty of failings.

The weather here is getting noticeably colder and next week we’re forecast to see minus numbers overnight.  However do spare a thought for Spain, who are facing yet more dangerous storms.  The Malaga area, including Marbella, is facing storms and heavy rainfall with some areas being evacuated.  Valencia, which was hit hardest by the recent storms that claimed the lives of more than 200 people is also expected to be hit once again. 

A pretty busty-looking calendar today, kicking off with EU GDP this morning.  US PPI this afternoon is expected to print higher than last month and as such may offer USD further support.  However, later in the evening we have the trio of Powell, Lagarde and Bailey speaking and I have a feeling the market may put more emphasis on their comments this time, particularly Powell given the moves in US interest rate expectations and the change in the political spectrum since Trumps victory.  I’d also expect Bailey to far less dovish on rates as he was back in early October when he talked of ‘aggressive’ rate cuts.

UK GDP will be out early tomorrow morning, important as we know but given the uncertainty of the impact of the recent budget on the UK economy the data could well be largely overlooked.

Have a great day

-  09.30 ECBs de Guindos speaks

-  10.00 EU GDP, industrial production

-  12.00 Feds Kugler speaks

-  12.30 ECB minutes

-  13.00 BoEs Mann speaks

-  13.30 US PPI, initial jobless claims

-  18.30 ECBs Schnabel speaks

-  19.00 ECBs Lagarde speaks

-  20.00 Feds Powell speaks

-  21.00 BoEs Bailey speaks

-  21.00 UK Chancellor Reeves speaks

-  21.15 Feds Williams speaks

-  21.30 NZ business PMI

-  23.50 Japan GDP

-  02.00 China retail sales, industrial production

-  07.00 UK GDP, industrial production