Markets quiet ahead of US CPI, might as well check out the cricket

Good morning

A lack of any important economic data yesterday meant we had, yet again, a pretty calm day in the currency markets.  Once again, ranges in the majors were pretty tight, the exception was JPY which traded from 148.50 to 149.30 through the afternoon, within ten pips or so of the highest levels since the beginning of August.  The weaker Yen helped drag GBPJPY up to 195.15 despite GBPUSD hanging around the 1.3070 area.

EUR was under a small bit of pressure, nothing significant but enough to see EURUSD down to 1.0945 and GBPEUR up to 1.1945.  Expectations of a November rate cut perhaps to blame. 

As I type, we are at similar to levels to where I left them yesterday evening.  GBPUSD at 1.3075, EURUSD 1.0935, USDJPY 149.15.  GBPEUR grinding higher to 1.1955, GBPJPY at 195.00.  I’m watching CAD with some interest, it has weakened steadily through the week, GBPCAD up to 1.7945 from a low around 1.7750, similarly USDCAD has moved up from 1.3570 to 1.3725.  Suggestions BoC will cut rates 50bps at their meeting later this month weighing on CAD, further weakening more than possible.

Netanyahu did speak to Biden yesterday but as at the time of writing no details of the conversation have been revealed.  There are some reports suggesting US are unhappy with Israel’s refusal to share details of any plans they may have.  Israel have said that any attack would be fatal, accurate and surprising.  Iran has since made it clear it does not want a war but will hit back with thousands of missiles if attacked.

Florida hurricane Milton made landfall in Florida, brining high winds, rain and even tornados.  It is expected to cause widespread damage.  Millions of residents were told to evacuate although not all had done so.  Reports suggest the hurricane has since been downgraded which, despite still being devastating, hopefully means less of an overall disaster.  We’ll know more as the day goes on.

Speaking of hurricanes, I’m not sure what is wrong with the BBC weather pages but they are reporting hurricane force winds in the UK over the next couple of days.  Clearly a mistake but its taking them a long time to correct it. 

Cleverly was knocked out of the Tory party leadership contest, something of a surprise given he was ahead in the third round ballot on Tuesday.  His departure leaves Badenoch and Jenrick in the battle to replace Sunak, the result will be known on 2 Nov. 

FOMC minutes yesterday showed the 50bps cut at the last minute was a very finely balanced decision, with some officials preferring a smaller 25bps cut.  In the end only Bowman dissented but others were close to doing so, in the end the risks to the labour market won over. It does however make another 50bps cut less likely.  

US CPI inflation numbers today are likely to be the highlight of the week.  The market is looking for a headline of 2.3%, down from 2.5%, while the core is expected to be unchanged at 3.2%.  Usual rules apply, a stronger reading should send USD higher, a softer than expected number should see USD back off a little.  We have a couple of Fed officials speaking after the announcement, worth checking just to see if they make any comment on rates. 

We’ll have the latest monthly UK GDP number early tomorrow morning, not the most important release, the quarterly numbers are the bigger deal, but there is hope we’ll get a number just above zero this time.  US PPI inflation is out tomorrow afternoon, not quite as key as the CPI but has been known to move markets.

I’ve not really paid much attention to cricket recently, I did see England were playing a test match against Pakistan but lost a bit of interest when I saw Pakistan scored a decent 556 in their first innings and presumed England would struggle thereafter.  How wrong I was!  England are currently 658-3.  Joe Root  is on 259 and his partner Brook is on 218.  During Root’s innings he surpassed Alastair Cook to become Englands all-time Test run scorer.  An incredible achievement. 

Have a great day

-  12.30 ECB minutes

-  13.30 US CPI, initial jobless claims

-  14.15 Feds Cook speaks

-  16.00 Feds Williams speaks

-  19.00 US monthly budget statement

-  22.30 NZ business PMI

-  07.00 German HICP

-  07.00 UK GDP, industrial production

RBNZ cuts 50bps with more expected in November, USD finds a bid ahead of tomorrows US CPI

Good morning

With no economic data on the calendar, yesterday was another calm day in the currency markets with most pairs stuck in reasonably tight ranges.  GBPUSD held mostly between 1.3085 and 1.3105, bar a few brief forays outside that range, EURUSD had an even tighter main range of 1.0980-1.0990, again with a few moves outside that range either side.  By the London close they were 1.3085 and 1.0965, placing GBPEUR at 1.1930.

This morning we have seen USD buying, which took GBPUSD down to a low of 1.3055 and EURUSD to 1.0950.  For EURUSD this was the lowest level since mid-August, while GBPUSD has half an eye on the Sept lows of 1.3000.  We are now 15 pips or so off those lows, I wonder whether this bout of USD strength is down to lower US rate cut forecasts or safe-haven buying on fears of Middle East escalation.  The likelihood is that it is a combination of these, plus some repositioning ahead of tomorrows US CPI inflation release.

Biden is reported to be speaking with Israeli PM Netanyahu today on potential Israeli strikes on Iran.  This follows a meeting with senior Israeli ministers yesterday to decide timings and targets of attacks.  Whether Biden will encourage Netanyahu to avoid further escalation, indeed whether they even listen to Biden, remains to be seen.  It is not even clear if Israel have decided on the nature of their response.  I think they should do nothing, but that’s highly unlikely.

Overnight we had the RBNZ rate announcement.  They cut rates 50bps to 4.75%, even though the cut was widely expected we have still seen NZD weaken, with  GBPNZD pushing as high as 2.1535, although is now back at 2.1470.  AUDNZD is now 1.1060 just a few points off its overnight highs, while NZDUSD is 0.6085.  RBNZ said they believe inflation is now back within their 1-3% target range.  The statement suggested further cuts were likely and didn’t fully dismiss the idea of a 75bps cut, should the economy see a downturn.  Indeed, a couple of large banks have adjusted their November forecasts, now looking for a 75bps cut, although most currently seem to be content with their 50bps calls.  Much will depend on incoming data over the next month or so.

The stimulus led boost to China equities has come to an abrupt halt, with Shanghai Comp down 6.5% and CSI 300 down over 5% overnight, the market still reeling from the lack of the announcement of further measures at yesterdays NDRC. 

Hurricane Milton is set to make landfall in Florida today.  There have been mass evacuations ahead of its arrival, which is expected to bring widespread flooding and damage, and unfortunately a loss of life.  It has been referred to as a ‘once in a century’ storm although I’d put money on there being more before we reach 2100. 

Talk Boeing could be downgraded to junk, as strikes hit cash flow, although it is fair to say their problems started much earlier, back to the two crashes of its 737 Max planes some years ago and a couple of other technical issues, including more recently a door flying off a plane in flight.  Incredible that a company with such a household name and such a history can potentially be reduced to junk status.  If it were to happen, the refinancing of their US$4bn debt in 2025 and US$8bn in 2026 will be more expensive.  All this on top of what S&P say could be a cash  outflow of US$10 if strikes continue to late 2024.

We have another empty calendar today, FOMC minutes this evening will be of interest as they relate to the meeting where we got a 50bps cut.  I’ll be using what I think will be another quiet day with some admin, and perhaps scanning through Amazon’s Prime deals to see if I can find decent bargains on yet more stuff that I just don’t need.   For example, I’ve seen a deal on a Ninja air fryer, which on the face of it looks good.  I’d probably succumb except if I’m honest my wife does 99% of the cooking and she has never expressed an interest in one so I think I’ll be giving it a miss, however tempting it may be. 

Let me leave you with one thought that puts some of the numbers we regularly read about into perspective, I won’t take credit for this, I saw it online somewhere.  Musk is worth some US$250bn.  We all know that’s a lot and to be fair to him he has built that on several successful businesses.  But to give that that amount of money some reality….you would need to save US$10,000 every single day for around 80,000 years to have that sort of money. 

-  09.30 ECBs Elderson speaks

-  17.30 Feds Jefferson speaks

-  19.00 FOMC minutes

-  23.00 Feds Daly speaks

-  01.00 AUS consumer inflation expectations

Volatility in China as markets reopen after Golden week

Good morning

It was, as I’d expected, a reasonably quiet day yesterday which saw little in the way of movement, save for GBP moving a touch lower against both USD and EUR (lows of 1.3060 and 1.0905), now 1.3085 and 1.0985.  The commodity currencies, AUD, NZD and CAD also lost ground, weakening even against the slightly beleaguered GBP, trading to 1.9360, 2.1365 and 1.7805.  

China markets returned after their week or so long holidays, buoyed for sure by the stimulus plans and the hope of further actions.  Chinese equities were up around 10% at one point, looking for the National Development and Reform Commission to announce some additional measures, however with no concrete plans announced equities fell back.  Chinese stocks were still in the black, Shanghai Comp and CSI 300 up 4% and 5.2% respectively, but well off the highs of around 10% up.  Hong Kong’s Hang Seng suffered more, down around 7% although it had been down 10% at one stage. 

AUD slipped lower still as NRDC failed to announce any new measures.  GBPAUD moved up to near 1.9500 overnight, now 1.9440, while AUDNZD fell back below 1.1000.  Mildly dovish RBA minutes offered little support to AUD although they did make it clear that the difficult job of bringing down inflation was not yet over. 

Florida is braced for what looks like another catastrophic hurricane (Milton) that is forecast to make landfall some time tomorrow.  After the recent damage from Helene, and with mass evacuations in place and further widespread damage expected, there is some question over whether residents in the region will be in a position to vote in the US elections in just under a month. 

Israel continues its offensive against Hamas and Hezbollah, one year after the Hamas attacks.  We have not yet seen any retaliation from Israel over the recent attacks by Iran.  Therer are some reports suggesting an Israeli attack is imminent but I am sure the likes of US are urging Israel to hold off.  I have to admit I do get the feeling that the two major Iranian attacks on Israel have been more for show than anything and Israel would do well to just let these pass.  They have enough on their plate for the time being.

If we thought yesterday’s calendar was sparse, todays is empty, save for some central bank speakers after the London close.  The key data will be the RBNZ rate announcement overnight, still looking for a 50bps cut.  What happens to NZD depends greatly on the size of the actual cut of course, but also the tone of the statement.  We could get a 50bps cut and a ‘we’re not done yet and think further cuts are necessary’ on perhaps a 50bps cut with a ‘further cuts won’t be as big’.   There is some chance we get a smaller cut, I’m not banking on that but if it did happen I’d think NZD would push higher but again a lot will depend on the tone of the statement.  Nothing is ever as straightforward as we’d hope.

Have a great day

-  17.45 Feds Bostic speaks

-  18.00 ECBs Nagel speaks

-  23.30 Feds Jefferson speaks

-  00.30 AUS Westpac consumer confidence

-  02.00 RBNZ rate announcement

-  05.30 RBI rate announcement