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

USD lower as US data disappoints again

Good morning

Another weaker than expected US PMI number yesterday sent USD lower once again, GBPUSD reached 1.2735 and despite a pullback to 1.2690 overnight we are now 1.2725.  EURUSD hit 1.0875, did drop overnight as well but is now back up to 1.0870.  GBPEUR now 1.1705.

Some bigger moves to report as well, USDJPY spent much of the day in the mid-150s but drifted back towards 150.00 and this morning the pair slumped to 149.35, helped in part by that weaker US dollar together with some rather hawkish talk from MUFG’s Seki who sees a possible rate rise this month and another rate rise later in the year which if correct could see JPY rates at 0.25% by year end. 

Bitcoin had an interesting day yesterday, trading above $69,150 at one stage before collapsing to around the $60,000 area, at one stage perhaps trading as low as $59,500 or so.  As ever with Bitcoin it is difficult to tell what caused the drop, although there is talk it was a large sell order of positions held since 2010, when it probably cost just a few cents.  It has done well to recover and now sits back up at $67,250.   Gold meanwhile continues to find support, currently $2126/oz, the talk of an attempted Houthi attach on two US warships probably cementing the idea of holding gold as a safe haven. 

The weaker US dollar hasn’t been helped by IMFs report on the banking sector which concentrated on the US$ trillion exposure to commercial real estate which could spell trouble for small regional banks.

Overnight Aussie GDP came in a touch softer than expected although at least showing growth as it has done now for nine consecutive quarters.  RBNZs chief economist said RBNZ could cut rates sooner than expected if Fed cuts rates first, suggesting that their own policy requirements are impacted more by US than what is required domestically.  GBPNZD traded just above 2.09 overnight before dipping to 2.0835, now 2.0865.   

It’s a pretty busy calendar today.  We hear from Powell today at his congressional testimony.  He is scheduled to speak at 3pm london time but the text of the speech is usually released a couple of hours earlier.  With the market now in line with the Feds forecast of three rate cuts this year I think Powell will be content with keeping the usual theme we have become used to.  US job numbers in the form of ADP and JOLTS will be out as well, and Powell is followed by several other Fed officials.  BoC are expected to keep rates unchanged at 5% this afternoon. 

In the UK, attention will be on the UK budget just after midday, a cut in NI rates has been widely talked about, as you know I think he’d be better off keeping it as is and getting some much need money in the countries coffers.  There is unlikely to be any significant changes in public spending although I did read that councils may be asked to limit spending on diversity.  Whatever Hunt comes out with i doubt it will have any significant bearing on the general election later this year, even a surprise cut in income tax would hardly encourage voters back to the Tories.  Fortunately we are highly unlikely to see any of the nonsense from the mini-budget in late 2022, but the market will be looking as to whether Hunt sticks to a sensible fiscal framework.

Looks like another dry day here but I’ve just looked at the forecast for the next couple of weeks and it looks like we could be in for a load more rain.  Oh joy.  Still, the evenings are getting noticeably lighter.

Could be a busy day so get the admin out of the way early. 

-  10.00 EU retail sales

-  12.30 UK budget

-  13.15 US ADP employment

-  14.45 BoC rate announcement

-  15.00 US JOLTS job openings

-  15.00 CAD Ivey PMI

-  15.00 Feds Powell speaks

-  15.30 BoC press conference

-  15.00 Feds Daly speaks

-  19.00 Fed Beige book

-  21.15 Feds Kashkari speaks

-  00.30 AUS trade balance

-  03.00 China trade balance

All about US data for now

Good morning

With little in the way of economic data to get in the way yesterday, the US dollar continued to trade on a softer footing, with GBPUSD trading to 1.2705.  EURUSD could only manage a small rally to 1.0860, meaning GBPEUR was a little higher, but stopping just short of 1.1700.  USDJPY was stuck in the mid-150s, ignoring a slightly stronger than expected Tokyo CPI reading overnight.  The bigger moves came in gold and bitcoin, both of which gained against USD reaching to around $2120 and $67,500 respectively.  As I type GBPUSD is 1.2675, EURUSD 1.0545, GBPEUR 1.1685.

Gold is actually edging towards the highs seen last in early December 2023, when it traded from the open on Sunday night to a high in the $2150 region, although given the markets were illiquid at that time the actual high was up for some debate with some seeing it only at $2135.  Back then the move was largely put down to safe-haven buying on reports of attacks on shipping in the Red Sea.  Here we are some three months later and not a lot has changed, we certainly seem no closer to any resolution in the Israel/Gaza conflict.

It could be a busy week from here on for USD.  ISM numbers are out later today, anything weaker than expected could send USD lower still.  US employment data comes thick and fast this week with both ADP and JOLTS Wednesday, challenger job cuts Thursday and then the highlight of the week, the US nonfarms on Friday.  Add in a bit of Powell who speaks Wednesday and Thursday and we have some reasonable potential for volatility.  I still see possibility of Powell erring on the less dovish side but as we have seen, weak US data can and most likely will send USD lower anyway.

Amid all of that we have the ECB rate meeting on Thursday, no changes expected there but the tone of the statement should be key for determining the appetite ECB has for rate cuts.  Any sign that they are nearing the time to pull the trigger could see GBPEUR back up towards the mid-1.17s and beyond.

Free scoring Arsenal had another dominant Premier League performance last night, beating Sheffield Utd 6-0 to keep them in contention for the title and if it comes down to goal difference their recent run of form has done them no harm at all.  Attention turns to the next leg of the last 16 of champions league matches this week. 

‘Celebrity Big Brother’ returned to our TV screens last night, as always there is some questions over whether some of the contestants really are celebrities, I’ve certainly only heard of about half of them but then again I’m not sure I’m the demographic they are really trying to appeal to.  I occasionally find the programme interesting, more for the psychological experiment than anything.  I don’t want to see huge shouting matches but it always better viewing if they don’t all get on brilliantly.  In the betting, someone I don’t know is a slight favourite over someone else I don’t know.  Not sure I’m going to get into this.

-  09.00 EU composite PMI

-  10.00 EU PPI

-  14.45 US S&P composite PMI

-  15.00 US services ISM, factory orders

-  17.00 Feds Barr speaks

-  00.30 AUS GDP