Watching Yen as it weakens to post-intervention lows

Good morning

It was another fairly quiet day in the currency markets yesterday.  We saw a slightly weaker USD which took GBPUSD and EURUSD to 1.2570 and 1.0805 respectively.  JPY also weakened, USDJPY broke above that 156.00 level I mentioned yesterday that had capped since the ‘intervention’ in early May, reaching a high this morning of 156.50 which in turn has taken GBPJPY up to 196.55.  Both GBPUSD and EURUSD are just a touch lower than yesterday’s highs, now 1.2555 and 1.0785 respectively. 

UK unemployment this morning was broadly in line with expectations and has had little lasting impact on the markets.  GBPEUR has made something of an attempt at a recovery, now 1.1645 after seeing a low of 1.1600 last week.

After the weaker US employment numbers last week, attention will turn to the release of the US CPI inflation tomorrow.  While this is certainly the key release this week, eyes will also be on today’s PPI numbers out of the US just in case we get something of a surprise either way.

Last night saw Aston Villa stage a decent comeback from 3-1 down to draw 3-3 with Liverpool.  Villa are likely to hold onto fourth spot, although it is mathematical for Spurs to overtake them.  Mind you, Spurs will need to beat a somewhat buoyant Man City side this evening to stand any chance of getting that Champions League spot.  Not sure I fancy their chances with that.  Of course, while the title will not be decided this evening, anything other than a win for Man City will put Arsenal in the driving seat heading into the last match of the season at the weekend.  Everything still to play for.

I’ve been having some painting done around the house, one of the joys of wooden framed windows is they do need fairly regular care and attention.  The last few days have been superb but I fear I’m going to have the decorators doing their stuff inside today as the weather gods have decided we’ve had more than our fair share of sunshine and have chosen instead to provide us with more rain.  Indeed, looking ahead as I do to the forecast over the next couple of weeks, there is a raindrop showing on almost every day until the last week in May.  I have a golf weekend at the very end of May, it’s a difficult enough game when the weather is good, I’m not greedy, I’m not asking for sunshine, just keep it dry!

As you can tell there is very little in the way of important market news so to avoid the risk of me just rambling on about nothing in particular you’ll be pleased to hear that I’m going to leave it there. 

Have a great day.

-  08.30 BoEs Pill speaks

-  10.00 German ZEW

-  13.30 US PPI

-  14.10 Feds Cook speaks

-  15.00 Feds Powell speaks

-  02.30 AUS wage price index

Quiet start to the week, US CPI on Wednesday is the one to watch

Good morning

Well what a fantastic weekend that was.  The weather was terrific, I nearly found myself saying it was too warm at one point, I managed to stop myself before doing so.  We didn’t get any of the thunderstorms that were forecast.  Many were lucky enough to see the Northern Lights with their own eyes.  Spurs scraped a much needed win, making quite hard work of it against a team struggling for Premier League survival.  Barring a ridiculous result, we will see the three teams that came up from the Championship last season all going straight back down again, highlighting just how difficult life is in the Premier League.  Nottingham Forest have survived by the skin of their teeth. 

I spent much of the day in London yesterday, we went to a VR gaming place where you don suits, headphones and goggles and enter a world of virtual reality.  It takes very little time to forget about reality and immerse yourself into the game.  Its still very early days for the technology, I wonder how good it will be in ten years time.  Good fun, but not cheap.  It was my youngest’s 17th birthday so aside from the expense of the day itself, I now have to contend with the minefield that is car insurance.  It is going to be painful.

Anyway, to the markets.  Well the reality here is that there isn’t much in the way of news.  We did have a weaker Michigan sentiment survey from the US Friday afternoon, but it was countered by a slightly higher inflation expectation which left the markets pretty much unchanged.

For the record, GBPUSD is off the morning highs, now 1.2520. EURUSD 1.0775, GBPEUR 1.1620.  USDJPY is holding just below 156.00 as it has done since the likely intervention in early May, which puts GBPJPY at 195.00.  Yen did actually have a small and brief rally in the early hours of this morning, USDJPY traded to 155.50 ins a straight line but soon pushed back up to the 155.90 area.

We also saw the latest RBNZ inflation expectations in the early hours of this morning, coming in lower than expected which pushed NZD down, GBPNZD trading up from 2.0815 to 2.0870 although this bit of GBP weakness this morning sees the pair back down to 2.0840.  RBNZ will be delighted with the lower readings.

It isn’t the busiest of weeks again in terms of economic data. We do have UK unemployment early tomorrow morning but the highlight will certainly be US CPI inflation on Wednesday. Fed will be really hoping to see any sign of softening which would likely see USD weaken a touch, but some think we could see USD push a little higher as we head towards the release.  Until then, certainly today, there isn’t much to get our teeth into.  A couple of Fed speakers are really the extent of the calendar today.

More football this evening, I’ll be hoping Aston Villa lose to Liverpool to keep Spurs hopes of a fourth place alive, however I’m not confident Spurs will overcome the might of Man City on Tuesday evening.  Arsenal are back to the top of the table but Man City have a game in hand.  Arsenal fans will find themselves having to support Spurs for 90 minutes tomorrow evening.  I was asked whether Spurs would deliberately lose to mess up Arsenal’s league hopes, I sincerely hope not and very much doubt it, although a defeat for Spurs would no doubt be cheered by the Spurs fans.  Incredible that after a whole season, the title race comes down to the very last match of the season. 

That’s all for this morning, have a great day.

-  14.00 Feds Jefferson, Mester speak

-  07.00 UK unemployment

-  07.00 German HICP

Sun shining as UK growth exceeds expectations

Good morning

UK interest rates remain at 5.25% as BoE decided to keep policy unchanged.  Two members, Ramsden and Dhingra, voted for a rate cut, the remaining seven members all voted for no change,  There was a mild dovish element to the meeting, inflation is not quite at a level where they are comfortable easing rates but the feeling is we are heading that way.  As with ECB recently BoE made it clear that they can act before and separately from the Fed.  The chances of a rate cut in June are around 50/50 but a cut in August is almost fully priced in.  I have seen a couple of banks bring forward their BoE rate cut forecast this morning, UBS being one of those now looking at a June move.

GBPUSD had dipped briefly to 1.2450 yesterday following the announcement but soon regained any losses and by the close had pushed up to 1.2520, above the 1.2500 pre-announcement level.  This morning we had the latest UK growth figures which showed a decent bounce in the UK economy compared to the recession we entered at the tail end of last year.  A stronger than expected monthly reading of +0.4% helped push the Q1 number up to +0.6%, higher than expected and well above the -0.3% for the previous quarter.  UK’s industrial production numbers also came in well above expectations. 

GBP has made further gains against USD this morning as a result of the stronger data, trading up to 1.2540.  It has also made a small recovery against EUR, at one point yesterday GBPEUR was down at 1.1600, as I type it is 1.1635.  EURUSD for the record is 1.0780.

Yesterday we saw the release of the latest Adobe monthly digital index, some say a decent precursor to US inflation numbers.  It was down 0.46% month on month, which many are hoping could indicate a drop in next weeks US CPI release, which in turn would prompt speculation of a Fed rate cut, although it is unlikely to come before the ECB and now perhaps even BoE.

We’ll hear from several central bank officials today, including BoEs Dhingra who voted for a rate cut yesterday.  Expect more dovish soundbites from her.  We will also see the minutes from the last ECB meeting, it will be interesting to see whether this offers any clues as to a June rate cut but also how many cuts we could see through the rest of 2024.

Over the weekend we will have the latest inflation data out of China.  Perhaps more importantly, we may also see some new tariffs placed on Chinese goods by the US, Chinese electric vehicles could be one the key imports to be hit.  China stocks were a bit lower, as was CNY.  Early Monday morning we will have the latest RBNZ inflation expectations. 

BoE and UK GDP aside, this week hasn’t been the busiest in terms of economic data.  Next week looks a just a little more lively, with UK unemployment Tuesday, while Wednesday bring EU GDP as well as US inflation and retail sales.

Heading into the weekend, rather hoping this spell of warm, sunny weather can last a few more days.  Spurs take on Burnley on Saturday, the big match over the weekend will be Arsenal v Man Utd, as the title race nears its end.  Spurs v Man City on Tuesday evening will be an interesting one, with Arsenal fans potentially having to cheer on Spurs to keep their title hopes alive.

I’m off into the City today so I’ll leave it there.  Have a superb weekend, enjoy the weather, nothing like feeling that bit of warmth on your face. 

-  09.45 ECBs Eldreson speaks

-  12.15 BoEs Pill speaks

-  12.30 ECB minutes

-  12.45 BoEs Dhingra speaks

-  13.30 CAD unemployment

-  14.00 Feds Bowman speaks

-  15.00 US Michigan sentiment survey

-  15.00 Feds Kashkari, Logan speaks

-  17.45 Feds Goolsbee speaks

-  18.00 Feds Kashkari speaks

-  18.30 Feds Barr speaks

-  19.00 US monthly budget statement