German politics in some turmoil as AfD win state election
Good morning
Welcome back, hope you had a terrific weekend. Plenty of sport on offer, South Africa eventually overpowered the All Blacks to win the third test match, and Kimi Antonelli came from 19th on the grid to win the Italian F1 grand prix, the first Italian driver to win on home soil since 1966. And in football, Arsenal came from behind to beat Chelsea, in doing so keeping their 100% win record along with Man City. Hull remain in the top four following their draw with Aston Villa. Spurs, well what can I say. Got the first point of the season with a 0-0 draw at Notts Forest, one of only three teams to have failed to score so far this season.
The weather over the weekend was fantastic, the car told me it was 28°c yesterday, pretty spectacular for this time of year. It will be cooler for the foreseeable future but looks like holding above 20°c which I think is pretty reasonable. Mind you, I’m off on holiday on Wednesday, where I’m heading is hovering around 30°c which I am certainly looking forward to.
Highlight of the weekend for me was going to watch Passenger, famous for his song ‘Let Her Go’, perform in a small record shop in London. With just 200 or so people watching it felt like something of a private performance.
A healthy US nonfarm headline on Friday of +162k, plus revisions to the previous headline which took it from -23k to +21k gave a boost to the US dollar which sent GBPUSD down from 1.3535 to 1.3485 and EURUSD from 1.1625 to 1.1585. The bout of USD strength was short-lived though, it wasn’t long before GBP and EUR were back above 1.35 and 1.16. USDJPY had an initial spike to 156.70 but soon dipped back to almost match the recent lows around 155.35.
Canadian employment numbers were released at the same time, I’d mentioned USDCAD on Friday and a possible option trade to look for volatility over the US and Canadian employment numbers. It is working with some success, USDAD traded up to 1.3870 on the release which gave us the opportunity to sell spot against the upside option, locking in a small profit and now hoping spot drops from current levels around 1.3835 which would serve to increase that profit.
US and Iran again renewed hostilities over the weekend with Iran firing on US warships and US attacking Iranian oil tankers. No surprise that WTI and Brent are trading up around recent highs, $92 and $97 respectively. Meanwhile Russia are increasing the number of attacks both day and night on Kyiv. This comes as there was some optimism over high-level US visits with Moscow, it isn’t clear what has been discussed but the hope was that they were trying to find some sort of peace deal.
Headlines in the papers this morning highlight the fact that Russia’s hybrid war in Europe is in full swing and that Europe and particularly the UK are seemingly unable to prevent or deter such attacks. Moscow have said the accusations of them being behind the drone attacks in Leipzig could signal the start of a real war. There are reports Chin have been supplying Russia with components for drones which won’t help US trade talks with China. I do fear that Argentina will see the UK as vulnerable and seek once again to take the Falkland Islands, particularly with Trump recently saying he wouldn’t support the UK given the lack of support he got from the UK in Iran. I hope I’m wrong but there just seems to be mounting pressure and rarely is there smoke without fire.
Over the weekend the German right-wing party, AfD, won the Saxony-Anhalt elections although just failed to achieve the outright majority they needed in order to be the sole governing party. They won around 44% of the vote with the conservatives managing just 17%. No far-right party has controlled a German state since the second world war but the result is seen as a clear message to Germany that the mainstream parties are struggling to keep up with the wishes of the people. This election victory means AfD may have to find another party willing to enter into a coalition although most parties refuse to join forces with the. The left-wing BSW, who got 5% of the vote, could be the answer, otherwise another election may be possible.
It’s a US holiday today so could be a quiet afternoon. This morning sees UK’s Chancellor Healey speaking, he is likely to paint a rather upbeat view of the economy, in contrast to his predecessor Reeves who preferred to talk down the economy. Mind you, with Jaguar Land Rover looking to shed thousands of jobs and with the cost of borrowing near 28-year highs Healey’s comments may be met with some derision. Still, he is likely to add that the UK budget on 28th October may see some painful decisions. Something to look forward to!
Have a great day…
- 09.30 UK Chancellor Healey speaks
- 10.00 EU GDP, employment
- 00.01 UK BRC retail sales
- 00.50 Japan GDP
- 04.00 China trade balance
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