Markets quiet ahead of nonfarms tomorrow

Good morning

I walked the dog yesterday after the showers ended, it was beautifully warm and sunny and so far this morning it looks like it could be very much the same.  Mind you, not wishing ill on anyone but I’m sort of hoping today rains as it’s another tube strike in London and I want those on strike to enjoy as little of their time off as they possibly can.

I went to see Jimmy Carr yesterday at our local(ish) theatre.  Not the first time I’ve seen him, I think the last time was Feb 2020.  He is good, more chuckles than outright side splitting laughter, and probably less utterly shocking punchlines than I’d expect, overall a good evening. 

Decent US ISM services PMI and ADP employment numbers yesterday supports the idea that the US economy is rolling along satisfactorily, pushing the door slightly further open for a Fed rate rise although I’d imagine Warsh won’t want that to be the result of his first meeting as Fed chair, and it certainly wouldn’t be what Trump expects from his nomination.  It will be very interesting to see what Warsh does, there are suggestions he’ll remove forward guidance on rates so maybe no more dot plots, and he could move to a more average calculation of inflation.

The US dollar pushed a little higher through the day and we’ve held those gains this morning, helped as well by a comment from Trump in an interview yesterday suggesting the Strait of Hormuz could be open by Labor Day.  That is September, far later than hoped, although Trump did say he still expects it to be resolved far quicker.  There are reports that Israel are agreeing a ceasefire with Lebanon although this is dependent on Hezbollah stopping all attacks on Israel and it’s forces.  Whether such a ceasefire can work really remains to be seen but for now it does offer a minor sense of relief, particularly as Iran has previously said peace in Lebanon should form part of a US/Iran agreement.

GBPUSD and EURUSD are currently 1.3415 and 1.1600, GBPEUR hovering around 1.1570 or so.  USDJPY crept briefly above 160 but soon came back below as fears of intervention and a slightly hawkish Ueda put doubts in the minds of Yen sellers.  The chances of a 25bps rise at BoJs June meeting is now over 90%.  We’ve seen a couple of spikes lower in UDJPY over the past couple of days, only 40-60 pips, this doesn’t suggest intervention but does show how nervous markets are. 

Aussie trade numbers overnight showed a return to a surplus, while last month’s deficit was revised by almost half.  AUD did gain a little initially but is now not far off pre-release levels, with GBPAUD 1.8820 and AUDNZD 1.2155.

Markets have been quiet this week and look set to remain so today ahead of tomorrow’s key US nonfarm release. 

One week until world cup starts, that’s the soccer world cup for our North American readers.  Spain and France are currently favourites with England third.  Germany looks decent value at 16/1 but I’ve not studied the groups enough yet to make a clear choice.  I’d quite like an outsider, Mexico for example, to surprise.  They are 85/1 at the moment.

Have a great day…

-  09.00 ECBs Lagarde speaks

-  10.00 EU retail sales

-  12.30 US challenger job cuts

-  13.30 US initial jobless claims

-  16.40 BoEs Bailey speaks

-  18.10 Feds Daly speaks