Why am i feeling pessimistic when I'm going on holiday tomorrow?
Good morning
It’s raining and pretty gloomy here this morning, which makes a change because historically when I go on holiday the weather at home is pretty decent. Actually a glance at the forecast suggests it could just be today that’s wet and miserable so hopefully for the rest of you things will brighten up again.
Miserable is a word that could be used to describe the general feeling at the moment. We are nearer any peace deal between US and Iran, oil prices are higher again with Brent up at $98.75 and WTI at three months highs around $94.20. There seems to be little chance of resolution between Ukraine and Russia, indeed if pushed I’d say an escalation is far more likely, both in Ukraine and in Europe where it seems clear that Russia have been behind several incidents already that the West seem powerless to control, while Argentina are, in my opinion, weighing up their chances of invading the Falklands once again.
The cost of borrowing remains at or near multi-year highs which is never great but made worse by the fact our borrowing is increasing at an alarming rate. Inflation is high, central banks are doing their best to hold off on rate rises that threaten to derail already-soft economies but at some point they may have to pull the trigger. There is growing public discontent over immigration and welfare, the cost of living rises we’ve seen in recent years is putting pressure on households and regardless of what Burnham promises it is nigh on impossible to think we are going to have anything other than a torrid few years. Ah, and taxes are likely to go up.
Crikey, I’m one day from going on holiday and I sound like a real miserable old grump of a man. Sorry about that. Maybe things are really not all that bad, perhaps it just the rain clouding my thinking.
To the markets and although yesterday was pretty quiet we have seen another shift lower in USDJPY which actually traded below 153 briefly overnight, now back up to 154 but still over 600 points below the high around 160.40 less than one week ago. This moves still doesn’t look like intervention, we’d almost certainly have seen a weaker US dollar if there had been official USD selling against Yen. Rather this seems down to Yen strength on BoJ rate rise thinking and potential for large-scale repatriation. GBPJPY currently 208.25 having seen a low overnight in the low-207’s.
GBP and EUR are currently 1.3535 and 1.1615 against USD which puts GBPEUR at 1.1650, a level the pair has struggled to push above for a week or so now. Against AUD, NZD and CAD, GBP trades at 1.8765, 2.3140 and 1.8670. Both AUD and CAD have made gains recently but NZD is lagging behind, as is clear when we look at AUDNZD which is now 1.2330, the highest it’s been since April 2013, spurred by more hawkish talk from RBA officials who make it clear they will raise rates again to curb inflation if necessary.
USDCAD meanwhile was at 1.3810 at option expiry time yesterday which worked well for the option trade I’d talked about Friday, resulting in a small but pleasant net profit of 35 cad pips, not huge but not bad given the original outlay was just 25 cad pips. See, life isn’t all bad!
There will be no more reports until week commencing 21st September but we’re certainly open for business as usual with Mark kindly manning the helm while I’m off. I’ve added this week’s calendar, the highlights could be ECB rate announcement which is likely to see a 25bps rise, Aussie inflation expectations which are in the spotlight after those hawkish RBA comments and then US inflation which, depending on how they come out could add fuel to Fed rate-rise thinking ahead of their rate meeting next week.
Looking ahead to next week’s calendar I may have chosen a bad time to be away. We have UK employment, inflation and retail sales, as well as the BoE rate meeting. From the US we have retail sales and the FOMC rate meeting, EU data comes in the form of HICP inflation, while NZ GDP and trade numbers plus BoJ rate meeting means there could be volatility overnight as well. Sorry Mark!
Plenty of football to enjoy while I’m away including some European fixtures which Spurs aren’t involved in. Spurs will play two league matches while I’m away, against Everton and Aston Villa. I’m hoping for four points from those games but I can’t say I’m overly confident. I could probably find a bar that will show those games but I’m not sure it’s a good idea. Maybe I’ll be pleasantly surprised.
Have a great couple of weeks, I’ll be on email if needed but won’t be glued to it so replies may be slower than usual.
- 13.15 US ADP 4 week average
- 14.15 BoE monetary policy hearings
- 16.00 ECBs Elderson speaks
Wednesday
- 02.30 China CPI
- 18.00 ECBs Lagarde speaks
Thursday
- 02.00 AUS consumer inflation expectations
- 07.00 German HICP
- 12.00 CBRT rate announcement
- 13.15 ECB rate announcement
- 13.30 US PPI, initial jobless claims
- 13.45 ECB press conference
- 15.00 US existing home sales
- 23.30 NZ business PMI
Friday
- 07.00 UK GDP, industrial production
- 09.30 UK consumer inflation expectations
- 13.30 US CPI
- 15.00 US Michigan sentiment survey
- 15.00 ECBs Lagarde speaks
- 18.00 ECBs Lane speaks
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