- richard evans
- Apr 17
- 5 min read
Good morning
I don’t think anyone will be sad to see the end of this week and a four day long weekend will be most welcome unless of course you are one of the unlucky ones who has to man the fort over the bank holidays. We do still have a full work day ahead of us before we can enjoy the holidays so now is not quite the time to put our feet up.
Equities were generally lower yesterday, US equities ended down around 1.5-3% after Feds Powell spoke and we had a very slightly higher USD, GBPUSD slipped from its highs around 1.3280 to 1.3205 overnight, bringing a halt to the rather persistent USD selling we’d seen so far this week. Powell made it clear that Fed are willing and able to remain cautious and wait for any new information on jobs, inflation and the impact of tariffs before deciding any policy changes. That is unlikely to please Trump who wants to see rate cuts. Earlier, US retail sales data had little impact coming out pretty much in line with expectations although worth noting upward revisions to the previous month, GBPEUR is a few points lower at 1.1645.
One other thing Powell mentioned was how tariffs could weigh on US attractiveness to other countries. EU’s von der Leyen has said that the ‘West’ no longer exists and talks of Trumps oligarchs who are making the rules. She could well be right. We know the US/Canada arguments that have taken place of the past few weeks, and Trump seeming to turn his back on Ukraine in favour of Russia did seem to bring home the differences between US and EU. Therer is some hope though as Trump is meeting Italy’s Meloni today, while US’s Witkoff and Rubio will meet EU counterparts in Paris today to discuss Ukraine, following Witkoffs meeting with Putin last week.
Meanwhile though, Japan have seemed to make some progress with US in trade talks, and a White House insider has said the UK could see a decent deal within the next three weeks. US deals with India and South Korea are likely to be announced first, along with Japan. These deals are as much in the US interests as they are of other countries. Ford has already said prices will rise in June or July unless tariffs are eased.
GBPAUD is currently 2.0855, up from yesterday’s lows around 2.0710, I’ve not really looked at AUDNZD for a while but a quick glance shows it is now 1.0740, not far from last week’s lows around 1.0690 which in turn was the lowest we’ve seen for over one year. This pair was above 1.1100 at the start of March, a pretty clear sign that AUD has lost ground during the tariff storm, partly due to its trade relationship with China. Must be room for upside here if trade deals are starting to be struck although RBA are likely to cut rates next month, a 25bps cut is priced in, the question is whether they start looking at a possible 50bps cut.
The Canadians chose to keep their rates unchanged at 2.75% and CAD did strengthen as a result, USDCAD dropped to 1.3850 or so at one point while GBPCAD declined to 1.8315, suggesting a rate cut had been partially priced in to some extent before the announcement. Macklem said that there is risk of considerable slowing in the economy, something rates alone cannot control. He highlighted the uncertainty the tariff issue brings and made it clear that now is not the time to be too forward thinking, preferring to react quickly if necessary.
BBC had an article that caught my eye yesterday. A Colossal squid has been filmed for the first time ever. I clicked the link expecting to see something huge and terrifying. As it turned out, it was a young specimen just 30cm long. Not exactly colossal. OK, it’s an important find but I must say I felt rather cheated.
Another article that grabbed my attention was the banning of holidaymakers bringing meats and cheese into the UK from the EU. I saw the headline and thought that we were on for an all-out trade war with the EU. As it turns out, the ban is a temporary measure designed to prevent an outbreak here of foot and mouth disease that has been spreading on the European mainland recently.
In sport, another superb display by Arsenal saw them overcome Real Madrid last night, beating the current Champions League winners 2-1. Inter Milan also went through as they drew with Kane’s Bayern Munich, Inter’s lead from the first leg proving just enough to put them through. Arsenal now face PSG, Barcelona play Inter Milan.
Of course the main European football matches take place this evening. Spurs are away to Eintracht Frankfurt in the Europa League, the teams level after the first leg. A loss for Spurs could well see the end of Ange’s reign while a win would keep him in the hot seat for another couple of weeks at least. Man Utd play Lyon, score is also level after the first leg. In the Europa Conference, Chelsea should stroll past Legia Warsaw this evening after winnig 3-0 in the first leg. Chelsea remain firm favourites to win the tournament.
Today bring the ECB rate announcement where a cut of 25bps is pretty much completely priced in, as a result I wouldn’t expect to see EUR weakness unless Lagarde says anything particularly new and dovish. We do also have the Turkish rate announcement, rates are expected to stay unchanged at a whopping 42.5%. GBPTRY is currently around 50.80 which should make life cheap for anyone heading there on holidays. I say ‘should’ only because I know that both inflation and some profiteering means prices are not as low as you’d hope.
Looking ahead to next week, the key releases are EU, UK and US manufacturing and services PMIs, along with UK retail sales that are out early morning of next Friday.
I’ll take this opportunity to wish you all a very splendid Easter break, Mark and I will not be at our desks but you are still welcome to call Mark should you need anything over the long weekend!
Have a great day and a great long weekend if we don’t speak before.
- 12.00 CBRT rate announcement
- 13.15 ECB rate announcement
- 13.30 US Philly Fed survey, initial jobless claims, housing starts
- 13.45 ECB press conference
- 16.45 Feds Barr speaks
- 00.30 Japan CPI