Will US inflation follow the Adobe Digital Price index this time?

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

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

This will be until Sunday 31st when we change our clocks in the UK.

Yesterday was something of a day of consolidation ahead of the all-important US inflation numbers this afternoon.  The sell-off in US dollar has stopped for now.   USDJPY is higher, helped by that slight USD strength but more so by comments from BoJs Ueda who sent JPY lower by saying BoJ need to see more data before deciding on a move away from negative rates.  The annual wage negotiations are pretty key here, they are due to be finished this week so perhaps we’ll have some more information then.  USDJPY currently 147.40, up from yesterdays lows of 146.50.

UK unemployment data out this morning showed lower than expected claimants, including a revision lower for last months reading, while wage growth was also lower.  GBP did drop on the release and has continued to do so while I type, GBPUSD moved from 1.2820 to 1.2790 where we are currently, GBPEUR has dipped to 1.1700 having tested the 1.1745 area a couple of times yesterday.

BoEs Mann, a known hawk who was one of the members voting for a rate rise at the last meeting gave further hawkish comments yesterday, saying UK are still far away from the 2% inflation target.  She is scheduled to speak again today, expect more of the same from her and while she serves as a very useful reminder that we are nowhere near out of the woods with regards to inflation, we do know her hawkish views are not shared by all members of BoE, as such are likely to have limited market impact. 

US inflation numbers are the key today.  Last month we were taken by surprise at higher than expected US inflation numbers and this morning the feeling seems to be the risk are also to the upside.  This has not stopped the idea that Fed will look at rate cuts in June, the numbers today would have to be pretty severe to take that off the table although Powell has made it clear that the Fed are in no rush to cut rates still looking at incoming data before making any decisions.  Pretty binary today I think, higher inflation, stronger US dollar, while lower readings will likely see USD back towards recent lows.  Worth noting that the adobe digitial price index, which regular readers will know can be a decent indicator for US CPI, actually showed declines in February, compared to a rise in January’s data.  Be interesting to see the correlation this time.

UK GDP and industrial production data will be released early tomorrow morning, we are hoping to see GDP a touch higher for January, moving away from those disappointing quarters that put the UK in a recession. 

I see I was right with the Kate Middleton photo that had created such an absurd amount of backlash.  She has admitted to tinkering with the image as many parents have done when trying to offer a respectable phot of three kids.  Hardly news.  And yet here I am writing about it.

The Cheltenham festival begins today, I hope they have better weather than the heavy rain we are seeing here this morning.  I’m no horse racing expert, so don’t expect any tips from me.  My usual practice of just picking the cool names doesn’t normally open to door to riches. 

Have a great day

-  11.00 BoEs Mann speaks

-  12.30 US CPI

-  18.00 US monthly budget statement

-  07.00 UK GDP, industrial production

US data continues to put USD under pressure

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

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

This will be until Sunday 31st when we change our clocks in the UK.

Fridays US employment numbers were softer than expected.  The headline itself initially looked strong coming in higher than expected at +275k, but on closer inspection the previous months reading had been revised lower from +353k to +229k, a pretty substantial drop, average hourly earnings came in lower than expected. while the unemployment rate ticked surprisingly ticked higher to 3.9% from 3.7%. 

USD duly moved lower, as it had done through the week at any sign of weak US jobs numbers.  EURUSD hit a high around 1.0980, GBPUSD traded up to 1.2890.  Both pairs are off their highs now at 1.0945 and 1.2845 respectively, GBP clearly benefitting more with GBPEUR now at 1.1735, having seen a high Friday around 1.1760.   USDJPY dropped to 146.50 although that too is now a few points off those lows at 146.80.  USD weakness is also reflected in the level of gold and bitcoin, I do hate grouping those two together but for now they both tell a similar story with gold hitting new highs last week at $2195 and Bitcoin doing the same this morning reaching a heady $71,500. 

Overall the US dollar has lost the most in one week than I can remember for a long time.  GBPUSD pushed through the Dec 23 highs and is now at levels last seen back in July 2023, worth pointing out that the high in that move was 1.3140.  EURUSD is not so buoyant, a lowering of ECB growth and inflation forecasts at their meeting last week certainly helped that move, even though the feeling is June is most likely for any rate cut by them, same with the Fed, UK less clear at the moment I think.

The weekend sport saw some rather interesting results.  India smashed England in the fifth test, winning by an innings and 64 runs.  It was a shocking end to the test series, leaving England to reflect on personal and team performances.  However, the England rugby team put on an exceptional performance to beat Ireland in the six nations, although Ireland are still favourites to win the title once again.  Scotland lost to a spirited Italy, Wales lost to France, leaving Wales at the bottom of the table with four losses out of four.   

In football, Spurs put on an important and dominant display over fourth place rivals Aston Villa, Arsenal moved to the top of the table with a win over Brentford while title rivals Liverpool and Man City could only draw.  In other sports, Antony Joshua put on an impressive performance, ending the fight against hard-hitting Ngannou in just the second round.  Remember Tyson Fury was taken the distance by Ngannou back in October and I wasn’t sure Joshua had it in him.  How wrong I was.  Verstappen won the F1 grand prix, no surprise there, but more attention was on Oliver Bearman who stepped in to replace Ferraris Sainz having been called up on Friday.  He finished seventh, I’m sure it won’t be the last time we see him in an F1 car. 

In other news, a load of odd goings on with the photo released by the Royals of Catherine with her three children, taken by William.  It was the first official phot of Kate since her illness/operation, but it wasn’t long before questions were being asked as to the authenticity of the photo with some highlighting potential manipulation in the image, and several news agencies have withdrawn the use of the photo pending clarification from Kensington Palace.  Look, I have three kids, and to get a photo of all three looking remotely sensible, let alone happy, is quite a feat.  I don’t need to offer mine to the press, but if I did I’m sure there would potentially be a little tweaking taking place to get the best out of it.    

I’ve not missed a load of information on the calendar, what you see is what there is.  An incredibly light day in terms of economic releases, only the appearance of BoEs Mann late in the day gives us anything of interest although note early tomorrow morning we will have UKs latest employment numbers.  US inflation numbers tomorrow will obviously be key, with US retail sales and Michigan sentiment data also out this week.  Further weak data out of the US must surely make that June rate cut more likely.

I hope you enjoyed the sunshine Saturday.  I was out in the garden and actually felt the warmth from the sun on my face.  Lovely.  Didn’t last long though, Sunday was miserable and the forecast doesn’t look good for the next couple of weeks.  With temperatures picking up, that grass will be growing at a rate of knots and by the time its dry enough to cut again I’m going to have quite a job on my hands.  Ah well there are worse things I could be doing.

I’ll end it there for now, somehow I’m running late despite  fairly early start.  Have a great day.

-  17.00 BoEs Mann speaks

-  23.30 AUS Westpac consumer confidence

-  07.00 UK unemployment

US data continues to weigh on USD, Yen rate rise talk continues

Good morning

It was another day of losses for the US dollar yesterday, led once again by slightly weaker US data, this time in the form of ADP and JOLTS jobs data.  Feds Powell was, if anything, less dovish than the data, certainly to begin with.  He made it clear that Fed were in no rush to cut rates and would prefer to see more data before they do so. 

However he then added that the Fed were not necessarily looking for lower inflation numbers, but no worse than current levels.  He seems to be saying that if inflation and other incoming data stay pretty much where they are, the Fed will be in a position to cut rates.  June still seems to be the most likely in terms of timing.  Kashkari remains less dovish, saying he sees two rates cuts at most this year, and possibly only one, compared to general Fed and market thinking that we’ll see three 25bps cuts.

GBPUSD reached 1.2760, while EURUSD peaked at 1.0915, each now just a few points off those highs, with GBPEUR just a few points lower at 1.1695.  It was a pleasure and something of a relief to see GBP holding up after the budget which offered very little in the way of surprises.  Always a bit worrying when tax take and debt to GDP rations are based primarily on made up numbers, even if they are made up by undoubtedly clever people.   We now look forward to hearing plans from the opposition in the coming months to see what they will promise.

Canada kept rates unchanged as expected, a mildly hawkish tone from BoC together with a generally weaker US dollar sent USDCAD down from its highs around 1.3600 to around 100 points lower at 1.3500, currently 1.3510.

China trade surplus came in at a whopping $125bn, up from a ‘mere’ $75bn last month.  With numbers like that China will potentially have the leverage to ride out the current economic difficulties they are facing.  Aussie trade numbers also showed a surplus of AUD 11bn, a touch below expectations but it’s still a decent number.  AUD slightly higher across the board.

USDJPY has seen another leg lower overnight, again the softer US dollar partly to blame but the yen strength really coming after some earnings data plus some hawkish comments from BoJs Nakagawa regarding progress on inflation.  We’ve also had some interesting comments from FinMin Suzuki who talked about intervention, surprising given the dip we’ve seen in USDJPY.  We have seen some pretty big banks suggesting a move away from negative rates could be seen as early as the meeting on 19th March.  I’m going to have to start looking at downside USDJPY or GBPJPY plays just in case, certainly if we get a bit of a bounce.  For the record the low in USDJPY so far has been 147.90, GBPJPY 188.35.

Elsewhere, Gold is trading higher, again led by US rate expectations together with geopolitical risks, we’ve seen a high so far of $2161, while Bitcoin upside seemed capped yesterday around $67,500, with support around $66,600.  Currently $66,900, it is unlikely to stay in that range for too long I’d imagine.  

Its another busy calendar today, more US jobs data comes in the form of challenger job cuts and initial jobless claims, any signs of weakness could add to USD’s woes ahead of nonfarms tomorrow, while Powell takes the floor again in his second testimony which is usually highly similar to the previous day.  Ferds mester also speaks later, she’s known to be on the hawkish side.

We will also have the ECB rate announcement, rates are expected to be kept unchanged, although there is a tiny chance of a rate cut.  We’ll have updated forecasts which are expected to see lower growth and lower inflation.  Otherwise, the press conference is likely to be key, where we hope to hear Lagarde offer some details as to the potential timing and pace of rate cuts.  For now, as with Fed, June seems to be favoured.

I’m out of the office today and a bit of tomorrow meeting clients and potential clients alike, almost certainly the greatest part of the job.  On the subject of new clients, we had something of a record yesterday, managing to get a new client account open in less than one day for a chap who was about to sign on the dotted line for an overseas property and needed to send some Euros out as a deposit. 

While much of our work is at the larger corporate end, we are equally happy to service any client who can benefit from our help.  In this instance speed was of the essence, and I’m pleased to say we delivered above expectations.  OK, we know it can’t always work this way but it is fantastic when it does.  I just love it when a plan comes together.

In sport, we’ve got the fifth and final test between England and India to ‘enjoy’.  England have already lost the series but were looking decent at 100-2, but after a typical collapse they are 190-8 so I’m not sure there will be much to enjoy.  Still, it might be worth turning on just to see the amazing setting of the pitch in Dharamsala, at the foot of the Himalayas with snow-capped mountains forming a stunning background. 

At the weekend we’ll see more six nations action although with England taking on Ireland it might be one to miss.  Even for the most confident England fan, odds of 4-1 don’t look good value to me.  And of course, we have premier league football.  A couple of really interesting matches including Spurs/Aston Villa and Liverpool/Man City on Sunday.  We’ve also got another F1 race to watch.  I know I should be careful what I wish for but I’m sort of hoping that rain comes so I’ll have a decent excuse to leave the garden and settle down to watch the sport.

Still, the weekend isn’t here yet.  I’ve added Fridays calendar below as I won’t be around to send tomorrow morning.  I’ll miss the EU GDP tomorrow but should be back at my desk in time for the nonfarms, traffic permitting.   

-  12.30 US challenger job cuts

-  13.15 ECB rate announcement

-  13.30 US initial jobless claims

-  13.45 ECB press conference

-  15.00 Feds Powell speaks

-  16.30 Feds Mester speaks

-  23.50 Japan GDP

Friday

-  07.00 German industrial production

-  10.00 EU GDP, employment change

-  12.00 Feds Williams speaks

-  13.30 US nonfarm payrolls

-  13.30 CAD unemployment