Quiet calendar today, but a busy week ahead

Good morning

For this week, US data releases will be one hour earlier at 12.30 or 14.00 london time due to the clock changes.

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

Friday was something of a non-day, the market largely ignoring the US durable goods and Michigan sentiment survey releases, with most currencies trading in tight ranges.  Commodity currencies, AUD, NZD and CAD all lost a bit of ground through the afternoon into the London close, pushing up to 1.9605, 2.1660 and 1.8015 against GBP respectively.  For AUD that’s the highest level since mid-Sept, for NZD it’s the highest since early August.  Those moves have extended this morning, GBPAUD now 1.9655 while GBPNZD is 2.1720 .

Moodys have downgraded their France outlook to negative, saying the risk that France will not be able to tackle their debt and deficit is increased.  This follows a similar move by Fitch a couple of weeks ago.  Meanwhile ECB officials seem to be playing down a Dec rate cut, Wunsch saying there is no urgency to cut rates, Nagel saying ECB shouldn’t be too hasty in adjusting policy, and Knot saying the Eurozone economy is not as bad as some suggest and that the next rate move can only be decided in December, ie there is no set path for rates.   

In Japan, the ruling LDP party has had a pretty disastrous election, winning just 191 of the 465 seats on offer and has lost its majority for the first time in fifteen years.  The ruling coalition, LDP and Komeito, now hold 215 seats compared to the 288 they had previously.  There was talk of PM Ishiba resigning but so far he doesn’t appear to have done so.  USDJPY traded up to 153.85, now 153.35, GBPJPY saw a high of 199.35, now 198.85.  Japan’s Nikkei opened nearly 2% lower but actually finished the day up nearly 2%.   

Israel attacked Iranian military facilities over the weekend.  They say they hit Iran hard, while Iran suggest the scale of damage has been exaggerated.  Not sure we’ll ever know the truth, but the hope is that they are both now done and we see no further escalation.  Fingers crossed and all that.  For now, oil prices open sharply lower, WTI moves around 5% down to US$68, while Brent has seen similar moves, trading down from US$75.85 to US$72.50.

England once again managed to grab defeat from the jaws of victory, as they allowed Pakistan to almost double their run total for the final three wickets, going from 177-7 to 344 all out.  England’s second innings was shocking, all out for 112 which gave Pakistan a tiny total to chase which they duly did losing just one wicket.  

Spurs were poor, losing 1-0 to Crystal Palace.  I take the blame for having said Palace and Forest recently lacked real quality in their match last Monday, Palace now get their first win this season and Forest move three points above Spurs in the table.  Man City go top as Liverpool and Arsenal draw.  Its going to be a long season!

Quite a lot of news, but therer is a good chance the markets today will be even more quiet than Friday.  A quick glance at the calendar shows there is nothing in the way of significant data out today, BoCs Macklem who speaks after the London close could be interesting but that’s likely to be about it.   Tomorrow has US consumer confidence and JOLTS job openings, and then Aussie consumer confidence overnight. 

The real fun starts Wednesday when we will see EU GDP, german inflation and US GDP and ADP employment.  The EU data could actually be more significant give the recent talk of 25bps or 50bps cuts at the next ECB meeting in December. 

And of course Wednesday brings the UK budget where we’ll find out exactly who Labour are calling ‘working people’, who is being taxed more, and by how much.  I don’t know if any of you saw BBC Laura Kuenssberg trying to get a definition of ‘working person’ from Bridget Phillipson, who dodged the question time and again.  Labour do seem to have backed themselves into a corner, desperate to raise taxes but equally desperate to not break their election promises of no tax rises.  Just raise the income tax rate and be done with it.  But no, it’ll be more complicated than that.  We just hope the markets take Labour’s plan of huge additional borrowing while trying to appear to be fiscally disciplined better than they took Truss/Kwarteng’s plan a couple of years ago. 

Have a great day.

-  18.30 BoCs Macklem speaks

-  20.45 ECBs de Guindos speaks

-  00.30 Japan unemployment  

Enjoy the relative calm, next week could be massive

Good morning

We had pretty tight ranges yesterday as the various PMIs came out broadly in line with expectations.  EU were almost spot on, UK were a smidge lower and US were fractionally better, as were the US initial claims and home sales data, but none were far enough away to really push the markets to any great extent.  

EUR, helped by reduced expectation of a 50bps ECB rate cut next month, had a slightly better day of it than GBP, perhaps the latter was affected a touch by the weaker PMIs.  GBPEUR slipped back below 1.2000 around the London close, reaching 1.1980 overnight.  EURUSD is now up at 1.0820, GBPUSD currently 1.2970. 

Overnight, UK consumer confidence moved lower again, now at -21, fears of tax rises in the upcoming budget partly to blame.  I’ve been reading about UK chancellor Reeves plan to change debt rules to free up funds for infrastructure spending.  This could amount to billions of pounds.  Am I right in thinking that this is simply borrowing even more money, while ‘promising’ to bring down debt levels.  Really, I’m no expert in government financing but something doesn’t sound right there.  And even if it was, wouldn’t it be inflationary?  Is there a risk of a Truss/Kwarteng type experience?

USDJPY fell back further, trading as low as 151.45 this morning, the market perhaps looking at reports of meeting between Japan FinMin Kato and US TrSec Yellen, something that no doubt raises the prospect of intervention with US approval.  Let’s not get ahead of ourselves though, USDJPY is around 1,000 points below its  highs earlier this year.  While Japan won’t want the yen to depreciate, these are probably not levels for them to act.  Japan elections over the weekend, results should be in by Monday morning.

CAD did weaken again with USDCAD trading as high as 1.3865, just surpassing the Wednesday highs.  It did fall back a little , 1.3855 has capped the upside overnight, although with a low around 1.3845 we’ve seen ridiculously tight ranges. 

We’ve had an interesting week this week, mostly led by USD strength but if we compare levels right now with those from last Friday’s close, GBPUSD is 70 pips lower while EURUSD is just 40 pips lower.  Lets not be complacent however.  Next week is pretty massive.   We have the UK budget on Wednesday, goodness knows what that will bring but I’m not looking forward to it. 

From the US we will have the usual line up of employment data including JOLTs, ADP, initial claims, Challenger job cuts and then the main event on Friday, the nonfarm payrolls.  But that’s not all, US GDP, core PCE, and ISM PMIs are all on offer next week.  From the EU we’ll have the latest GDP and inflation numbers, throw in Aussie inflation and a BoJ rate announcement and we’ve got a pretty full week, most of those releases come later in the week so perhaps we’ll have a calmer Monday and Tuesday, but its full on after that.

Spurs managed a win yesterday, they looked good in the first half but a bit more fragile in the second.  Still, a win is a win, and Spurs remain overall favourites to win the tournament, but they’ll have to improve, that’s for sure.   Galatasary away in a couple of weeks, that’ll be a tougher test.  In the meantime, Spurs take on Crystal Palace on Sunday, the pick of the weekend matches should be Arsenal v Liverpool.

In cricket, having said England were struggling in the latest test match, they ended up all out for 267, while Pakistan are currently 187-7.  Perhaps we didn’t do so bad after all.  Can’t see this going to five days!

The clocks change this weekend, going back an hour which I think means we get an extra hour in bed but then I always end up feeling tired come the end of the day.   The US don’t adjust their clocks until the following weekend which means heir data releases will be one hour earlier for a week, as will currency option expiry times.

Have a great weekend as and when it comes.  We might get some fog Saturday and some sunshine Sunday, but it looks like it will be broadly dry.  The garden is covered in leaves but the trees still look full, I’m going to have my work cut out over the next few weeks.  Still, therre are worse things to do.

Oh, by the way, its November next week and it’s Christmas in two months!   When did that happen?

-  09.00 German IFO

-  13.30 US durable goods

-  13.30 CAD retail sales

-  15.00 US Michigan sentiment survey

-  16.00 Feds Collins speaks

BoC cuts 50bps as expected, PMIs form EU, UK and US in focus today

Good morning

BoC did indeed cut rates 50bps to 3.75% yesterday but CAD moves were somewhat muted.  USDCAD ticked up to 1.3860 but failed to follow through and BoC Gov added little during the press conference.  Inflation risks are pretty balanced, 2024 and 2025 growth forecasts were unchanged at 1.2% and 2.1% respectively, while 2026 was lowered a touch from 2.4% to 2.3%.  Also in Canada, PM Trudeau is under pressure from members from his own party to stand down, despite overcoming two confidence votes.  They have set a deadline of 28th October.

USD held onto gains through the day, GBPUSD slipped to 1.2925 just after the London close, EURUSD was 1.0775 which was just 10 pips or so off the days lows, which in turn were below the August lows and the lowest levels since early July.  For those who like technical analysis, I see something of a rising trend line from the late Nov 2022 low which has been tested and has held several times since, including Oct 2023, and Apr and June 2024.  It currently comes in around 1.0740.

GBPEUR traded up to 1.2040 but dropped off through the day back towards the 1.2000 level.  As I type, GBPUSD has pushed up off the lows, now 1.2955, while EURUSD has held the 1.0775 level, which means GBPEUR has pushed on to 1.2025.  USDJPY is currently 152.05, GBPJPY 197.00, both off recent highs.  We’ve seen a little of the usual verbal intervention, while BoJs Ueda has said he is kept awake thinking about the timing and size of the next rate cut. 

We know other central bankers were speaking yesterday but as I’d expected none really offered anything we’d not heard before.  ECBs Holzmann said another 50bps cut is unlikely but not impossible, RBNZ Gov Orr said rates remain restrictive but he prefers to lower rates gradually, still looking at ongoing inflation pressures.  Orr also mentioned that he’d wish participants would actually take the time to read RBNZ minutes rather than rely on just picking up the odd point from journalists or analysts, who he thinks focus on just specific areas.  He was quite honest about how difficult a central banks job is.   

In sport, Man City and Liverpool won their Champions league matches, City with a convincing 5-0 win.  In the big match, Barcelona beat Bayern Munich 4-1.   The serious stuff starts this evening, with Spurs taking on AZ Alkmaar in the Europa League.  Man Utd and Chelsea are also in European action tonight.  In cricket, England have slipped to 112-5 in the deciding test match against Pakistan.  That doesn’t bode well.

In other news, I see that disposable vapes will be banned from next June.  I have found it amazing that we have to drink out of paper straws while vapes, full of lithium batteries and goodness knows what chemicals are thrown into landfill at an alarming rate.  I’m not sure what will happen to people who use vapes, I presume there are non-disposable versions but I’d imagine they are larger, less convenient and certainly less attractive than the current crop of disposable vapes. 

Today is very much a day of PMI’s, with numbers out from EU, UK and US.  We have seen some very better than expected PMI numbers out of Germany so far this morning, but we’re watching the numbers for any signs of weakness, particularly for the US data.  Weak numbers could see the USD reverse some of the recent gains.

Have a great day

-  09.00 EU services, manufacturing PMI

-  09.30 UK S&P services, manufacturing PMI

-  11.00 Buba monthly report

-  13.30 US initial jobless claims

-  13.45 Feds Hammack speaks

-  14.00 BoEs Mann speaks

-  14.45 US S&P services, manufacturing PMI

-  15.00 US new home sales

-  20.45 BoEs Bailey speaks

-  00.01 UK GfK consumer confidence

-  00.30 Japan Tokyo CPI