GBP remains bid despite lower than expected inflation data

Good morning

Yesterday saw global equities recede a little after a couple of days of gains and futures prices point to a lower open this morning.  GBP remains well bid despite inflation coming in below expectations, led largely by lower petrol prices.  GBPUSD ticked up to 1.3280 this morning, quite a turn from the lows near 1.2710 just over one week ago.  GBP also remains bid against EUR, that pair now 1.1660, we’ve also got higher levels in GBPAUD and GBPNZD now 2.0920 and 2.2435 respectively.  This latest round of inflation numbers does go some way to support a BoE rate cut in early May.

Bank of Canada will announce their latest rates decision today.  There is a mixed feeling here as to whether they keep rates unchanged at 2.75% or reduce them to 2.5%.  The former probably still has the edge although softer than expected Canada inflation yesterday, plus concerns of a global slowdown and trade wars could see BoC making a pre-emptive cut.  CAD at six months highs vs USD could also offer room to BoC to cut.  USDCAD currently 1.3915, GBPCAD 1.8475.  Tempted to look at upside USDCAD trades just in case, perhaps the overnight 1.3950 usdcad call for around 30 cad pips…

Gold prices continue to push to record highs, reaching within a dollar or two of $3,300.  I still think China is behind the move but I’m sure funds are long the precious metal as well. 

EU seem to be making little progress in trade negotiations with the US, with the White House looking to not only discuss trade but also ways of ensuring countries reassess their economic ties with China.  China are ramping up the trade war, accusing the US of protectionism which is a bit pot/kettle if you ask me.  China have told their airlines to stop taking deliveries of Boeing planes and are also reducing the supplies of rare earth minerals the US need.   No wonder the US are so keen to get a deal with Ukraine.  They will be eager to do so before Russia start what many think will be a new, massive offensive.  The Times reports that Russia may also be ready to target NATO, accusing France, Germany and the UK of escalating the war in Ukraine.

Aston Villa fought back bravely against PSG last night in their Champions League quarter final but the two early PSG goals and a decent lead form the first leg were enough to see PSG through.  That last minutes goal by PSG last week did indeed come back to haunt Villa.  Barcelona are also through despite losing 3-1 to Borussia Dortmund.  This evening sees Arsenal looking to make the most of their 3-0 advantage over Real Madrid, that could be an interesting match if Madrid get an early goal.  Meanwhile, Kane’s Bayern will be trying to overturn a 2-1 deficit with Inter Milan.

Today brings EU inflation and US retail sales as well as the BoC rate meeting.  Feds Powell speaks later this evening and we’ll have NZ CPI and Aussie employment data from our friends down under.

Have a great day…

-  10.00 EU HICP

-  13.30 US retail sales

-  14.15 US industrial production

-  14.45 BoC rate announcement

-  15.30 BoC press conference

-  17.00 Feds Hammack speaks

-  18.30 Feds Powell speaks

-  23.45 NZ CPI

-  00.00 Feds Schmid speaks

-  00.50 Japan trade balance

-  02.30 AUS employment

Markets enjoy another day of improved risk sentiment, hoping for more of the same today

Good morning

Half way through April already and the markets continue to trade with a degree of optimism that I find mildly odd given the potential for upheaval in global trade, with or without large tariffs.  I can’t see us going back to how things were a few months ago, that’s for sure.  Quite how this all pans out remains to be seen, will Trump take a slightly kinder view on his ‘allies’ or will he continue to alienate them and perhaps even push them into relationships with some who would not normally be seen as allies?  Plenty of talk of exemptions and exceptions to tariff rules but there is too much uncertainty to know what will actually come into place. 

Together with higher stock prices in both EU and US, the US dollar saw more general weakness although that US 10 year yield remains stubbornly high around the 4.5% area.  GBP has performed well, perhaps helped by US TrsSec Bessent who seemed to single out UK, Australia and South Korea as top targets for trade deals.  I can’t help thinking Trump is trying to drive a wedge between UK and EU.  GBPUSD traded up to 1.3220 this morning, UK employment numbers didn’t really provide any major market impact, if anything they were slightly better than had been expected, as were the BRC sales numbers overnight.  GBP has held up well against EUR, GBPEUR climbing to 1.1640, some 120 points up from yesterday morning lows.  No surprise that AUD is also up.

EURUSD is 1.1345, not collapsing but unable to move higher despite USD weakness, most likely down to Trump’s continued reference to EU as a trading bloc set up to attack US.  I think he must mean ‘compete with’ rather than ‘attack’.  EU’s trade guru Sefcovic is in Washington to discuss trade in the 90-day window.  The problem is, and I say this as absolutely nothing of a trade expert, the US will want EU to take their cars and their chickens, both of which are generally below the standards expected from the EU. 

Mind you, I’ve not been to Europe for a few months but if London is anything to go by, the UK and perhaps EU have not been slow in buying Teslas.  The roads are full of them, far more so than any other electric vehicle.  I know there is increasing competition from China but in my mind Tesla still rules the roost.  So Trump can hardly say we’ve not been buying US cars.  We just don’t want the massive pick-up trucks that are far more suited to their roads.

Elsewhere, RBA minutes show a degree of caution on rate cuts.  That meeting came just before Trump’s ‘Liberation Day’ tariff announcements so RBA officials were rightly reluctant to look too far into the crystal ball. RBA will be patient.  BoJ could be patient as well, there had been talk of rate rises in their may meeting but there seems to be suggestions that they’d rather stay in wait and see mode, particularly with Yen well off its recent lows. 

In other news, I read somewhere that Hamas are talking of handing over a large number, if not all hostages on condition that Israel withdraw from Gaza.  Whether that is enough for Israel to end their Gaza attacks remains to be seen, but I doubt Israel will agree to anything that prevents them from attacking Hamas infrastructure.

The UK steel plant in Scunthorpe continues to remain under threat as the race to get materials to keep the furnaces firing at high enough temperatures goes on.  If the furnaces are not kept going, the melted iron ore at the bottom of the furnace solidifies into an immovable lump, blocking the furnace and making it pretty much irreparable. 

In Ukraine, Zelensky pleaded with Trump to come to visit Ukraine to see for himself the destruction caused by the Russian invasion.  Trump responded by seeming to blame Ukraine for the invasion, or at least holding the jointly responsible.  Slightly odd given they were invaded but we have come to expect that from Trump.  Meanwhile the US/Ukraine mineral deal is still being negotiated.  Talk is that large Russian forces are building, lining up another potential large-scale invasion.

That’s about all for the time being, I’m out and about for much of the day so need to get going. 

Not the fullest economic calendar today, nothing that will really overshadow the ongoing trade battles/wars/talks.  UK inflation out early tomorrow morning, market looking for something around similar levels to last month, if anything erring on the lower side.  However it would need to did come in significantly lower I’m not sure it will be enough to turn this current strong GBP trend.

Have a great day…

-  10.00 German ZEW

-  13.30 US NY empire state manufacturing index

-  13.30 CAD CPI

-  17.00 ECBs’ Lagarde speaks

-  00.10 Feds Cook speaks

-  03.00 China GDP, industrial production, retail sales

-  07.00 UK CPI, PPI, RPI

Equities up, USD down, for the time being at least

Good morning

What a fantastic weekend spent with the family celebrating my eldest’s 2st birthday. We enjoyed cocktails and steaks on Saturday and drinks with friends and family in one of our local pubs yesterday, which obviously went on considerably later than planned and it is fair to say I have felt better on a Monday morning.  As a result of the celebrations I missed pretty much all of the sporting action over the weekend. 

Congratulations first to McIlroy for eventually winning Masters and in doing so claiming the grand slam of majors.  Congratulations as well to McLaren’s Piastri for winning the Bahrain F1 GP and also to Liverpool for extending their lead in the premier league table to 13 points with just 18 points available, my simple maths calculates therefore that they need just one more win to claim the title. 

Let’s not talk about Spurs who, having lost to Wolves have taken just four points from the last 18 available as could well be looking at finishing in 17th place, just above the relegation zone.  Ange’s days must surely be numbered, perhaps even if Spurs do somehow win the Europa League.  Still, one of the RAM founders will be happy, with Mark’s Leeds still on top of the championship and in the automatic promotions places.  Sheffield Utd who at one point looked like they were running away with it have now lost three matches in a row to put their chances of automatic promotion in some jeopardy.

Anyway, enough of the weekend, lets look at the markets.  Friday saw EU and US equities end in positive territory, Asian markets were pretty much the same overnight.  Futures markets point to higher opens this morning.  The US dollar was generally weaker and we’ve seen a continuation of that since the open, GBPUSD now 1.3155 and EURUSD almost at 1.1400.  USDJPY has traded as low as 142.25, now 142.60.  US 10 year yield remain in the 4.5% area, helped in some small part by word from Japan that they won’t use Treasury holding as a bargaining chip in trade talks. 

Last weeks highs and lows led by Trumps on-off tariffs was something of a mess and I’d love to know what the White House really think about the mayhem they caused.  I speak in the past tense but of course we all know this is nowhere near the end of this and it is nigh on impossible to work out exactly how it will finish.  Which countries will get a decent trade deal ? 

How bad will the US/China  trade war get before something gives way.  Overnight we saw the latest China trade balance, which showed a massive overall surplus of $102.64bn, far greater than expectations.  That’s a lot of money to buy gold with, which happens to have retested the highs around $3,245 overnight.  That’s not all with the US of course but Trump will be looking with some jealousy at that surplus and would do anything to get the US that sort of trade balance.

 Big news over the weekend was the Uk government taking control of British Steel.  Some quite damning reports coming of possible deliberate action by its former Chinese owners to let the plant collapse, forcing the UK to be reliant on China steel imports.   Having become a steel furnace expert over the weekend, I discover that they must be kept running with supplies of coal and iron ore as they are damaged and very expensive to restart once they cool. It seems that the Chinese owners not only failed to purchase the materials needed to power the furnaces, I read one report suggesting they had been selling their remaining supplies of coal. 

Some have gone so far as to call this sabotage, and should serve as a warning of the risks attached to getting investment in major infrastructure from overseas powers.  I remember that China were going to be building the UK’s newest nuclear power stations, I wasn’t over the moon at that idea, nor was I keen to find out France owns most of our electricity power stations.  There are some things we just shouldn’t have to rely on any other country to provide.  The steel industry is an issue as it does seem to be perpetually loss-making but every other G7 nation seems to have its own steel manufacturer.  I presume they are also loss-making, I can’t believe it is only ours.  Cheap China imports won’t help.  Perhaps we should look at bigger tariffs…..

Not much on the calendar today, we’ll have UK unemployment first thing tomorrow morning and inflation Wednesday morning, US retail sales and BoC rate announcement Wednesday and ECB rate announcement Thursday.  It’s a short week this week and the next with Easter holidays Friday and Monday.  Typically, the weather looks like it’ll be a bit more mixed that we’ve had recently but I guess we should be used to that.

Have a great day…

-  18.00 Feds Waller speaks

-  21.00 Feds Harker speaks

-  00.01 UK BRC retail sales

-  00.40 Feds Bostic speaks

-  02.30 RBA minutes

-  07.00 UK unemployment