Markets await any Ukraine peace news, look to UK budget tomorrow

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

I mentioned yesterday the reverse correlation between EURUSD and US equities, and we saw more evidence of this yesterday when S&P500 rose 1.75%, while EURUSD fell back below 1.0800.  GBPUSD was also well of its highs but still performed better than Euro, GBPEUR touching 1.1980 at one point in afternoon trading and although GBPUSD was back down at 1.2900 into the London close, GBP held most of its gains against EUR. 

As I type EURUSD is testing the 1.0780 area, GBPUSD is hovering just above 1.2900, with GBPEUR 1.1970.  The talk of more targeted rather than sweeping tariffs certainly helped US equity markets recover, even the much beleaguered Tesla shares made an impressive 12%

We had PMIs from EU, UK and US yesterday, UK and US numbers were remarkably similar in that services and composite numbers were better than expected, but manufacturing slipped below expectations, while in the EU it was the other way round, with services lower but manufacturing and composite a touch better.

Trump has expressed his wishes that Fed will lower interest rates, although Feds Bostic has said he sees only one more Fed cut this year rather than his previous thinking of two cuts, as the imposition of tariffs will have an upside impact on inflation.  He can’t see inflation back to 2% target until 2027.

Talks between US and Russian officials continued through the day, but there were plenty of reports of continued Russian missile attacks on Ukrainian cities, hardly a sign of peace, but I have to say some Ukrainian attacks on a Russian oil station was also reported.  A joint US/Russian statement is due to be released around 8am this morning.  I still feel that US are more interested in ensuring they have access to Ukraine’s mineral reserves than a real lasting peace deal.

Plenty of headlines around the US ‘secret’ security group chat where military plans were discussed openly with a journalist who had been accidentally added to the group.  What was interesting was Vance’s comments on the group chat, where he said ‘I just hate bailing Europe out again’.  He was the spark that ignited the recent Trump/Zelensky press conference.  OK, very pro-US but Perhaps it is indeed the right time for Europe to be bolstering its own military capabilities.

England managed a 3-0 win over Latvia yesterday, another win under Tuchel’s belt although another performance that lacked the spark we were hoping to see.  Still, this is the international arena and while we have some good players I’m not sure we have many truly ground-breaking players, so sparks may be few and far between.  Winning is what is important and that we have done with the minimum of fuss. 

Not the most interesting calendar today, I am wondering if we’ll see a day of consolidation unless we get some major Ukraine or tariff news.  Tomorrow brings the UK budget where a funding shortfall and spending cuts are likely to be announced.  OBR are expected to slash the UK’s 2025 GDP forecast from 2% to 1%. 

Before then, UK inflation numbers are early tomorrow morning.  Reeves has said that UK is positioned well to benefit from favourable trade relations with both US and EU.  This should be quite true, although to be honest I can’t see either US or EU wanting to help the UK out in any major way and I’m not sure it’s a reason to buy GBP.  Higher borrowing costs for the UK and an uncertain outlook make, if anything, GBP a bit fragile.

The sun is shining although still not as warm as I’d like.  Still, I’m up in the City for some meetings today and as long as its dry I’ll be happy.   

Have a great day…

-  09.00 German IFO

-  12.40 Feds Kugler speaks

-  13.00 US house price index

-  13.05 Feds Williams speaks

-  14.00 US consumer confidence, new home sales

-  16.00 ECBs Nagel speaks

-  00.30 AUS CPI

-  07.00 UK CPI, RPI, PPI

Tariffs and peace talks in focus this week

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

The US dollar ended last week on a bit of a high, GBPUSD had briefly traded down to 1.2890 but in the end closed the week around 1.2915, while EURUSD traded just below 1.0800 for the first time in two weeks before closing around 1.0810.  On the open Sunday night USD initially retested those highs but it didn’t take long before we saw a bit of USD weakness returning, as I type GBPUSD is up at 1.2945, EURUSD 1.0840.  This leaves GBPEUR at 1.1940, just above support which comes in around 1.1925.

The weaker US dollar seems to have coincided with the fall in US equity markets, indeed if I plot them both on a chart over the past month they look like something of a mirror image.

Plenty of tariff talk given Trumps 2nd April deadline is just a week or so away now.  Reports suggest a slight change in the US approach to tariffs, perhaps focussing on the fifteen or so nations who have trade imbalances with US, the ‘dirty 15’ as US Treasury Secretary Bessent calls them.  China and EU are among these, although it is clear the situation is pretty fluid and can change at any time.

A lot of focus on Saudi Arabia where US are meeting Russia officials following separate talks between US and Ukraine.  There has been a suggestion that China could join the talks which may put more pressure on Russia to find peace.  I’ve seen the 20th April being discussed as a date by which US wants to see a truce between Russia and Ukraine but whether that works out remains to be seen.  Big question marks over whether Russia wants peace at all, I have also seen a couple of articles that talk of a possible Russian invasion of Lithuania sometime this year.  Lithuania are a NATO member and as such any military action against it should, under Article 5, see other NATO members spring to its defence.

Canada’s Carney has called for a snap election to be held on 28th April.  His tussels with Trump have made him popular enough that I imagine he believes he can win.  It is certainly a time for Canada to be unified amidst the background of Trumps attacks on the country.

In Turkey, Erdogan’s opponent Imamoglu has been jailed, leading to large scale protests that have been dealt with by tear gas and rubber bullets.  Imamoglu has been accused of running a criminal organisation.  A vote held Sunday was likely to see him elected as CHP’s 2028 presidential nominee to go up against Erdogan, I think he may actually have been the only candidate.  If he is convicted he will not be able to run for President.  Erdogan shouldn’t run in the 2028 election due to limits of years in office but my money is on him changing the laws to allow him to stay in power.  Plenty more to come on this.

Over the weekend Spurs managed a win against AC Milan.  It was a match of ‘legends’ featuring players from the past although from what I have seen many of them could still warrant a place in the first team.  Meanwhile England’s footballers take to the field again this evening in their second world cup qualifying match, this time against Latvia.  England beat Albania on Friday in Tuchel’s first match as manager.  A win is always good but the overall performance wasn’t much different to previous England matches.

 Today brings EU, UK and US PMIs.  UK inflation numbers are out early Wednesday morning, on which day we will also have Chancellor Reeves spring statement.  UK retail sales follow Friday.  From the US we have GDP Thursday and core PCE Friday. 

Have a great day…

-  09.00 EU manufacturing, services PMIs

-  09.30 UK S&P manufacturing, services PMIs

-  13.45 US S&P manufacturing, services PMIs

-  18.00 BoEs Bailey speaks

-  19.10 Feds Barr speaks

-  23.50 BoJ minutes

What happened to BoE's Mann rate cut vote?

Good morning

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place at the weekend. 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

This will be until Sunday 30th when we change our clocks in the UK.

Bank of England did keep rates unchanged at 4.5% yesterday, a decision that surprised no one although the 8-1 vote was mildly startling.  Dhingra was the only dissenter, calling for a cut.  Mann, who had called for a 50bps cut at the last meeting, went back to looking for no change.  That’s a really odd set of votes in my book.  Mann is usually on the hawkish side so for her to have voted for a large cut in February was a real shock.  But how can she now go from a 50bps cut to no change?  It’s almost as though she just put her hand up at the wrong time last month but didn’t want to admit it. 

Anyway, in summary BoE’s thinking isn’t too dissimilar to last month.   They continue to watch for risks of inflation, uncertain how tariffs will play out and of course there is plenty of uncertainty at home with the spring budget next week.   Rates are likely to go down, albeit gradually.  GBPUSD danced around a little, trading a low of 1.2935 and a high around 1.2980.  It continued to show strength in the crosses, GBPEUR moved up to 1.1975, and the likes of GBPAUD and GBPNZD traded back up towards recent highs around 2.0640 and 2.2600 respectively. 

Currencies were reasonably stable for much of the night but through the early hours we have seen a bit of USD buying which puts GBPUSD currently at 1.2925 and EURUSD at 1.0825, leaving GBPEUR off its highs at 1.1940.  You may remember I talked of a EURUSD trendline that I’ve been watching.  It dates back to Nov 2022 and hadn’t been broken until Nov 2024 when EURUSD fell to the 1.02’s, now we’ve seen EURUSD breaking up through that line again in early March, support now coming in around the 1.0820 area.  Technicals are not everyone’s cup of tea, I’m not a huge follower, but there are times where the charts look interesting. 

South Africa kept rates unchanged at 7.5% yesterday, while Turkey raised the lending rate to 46% from 44%, a reaction to the sharp losses seen in TRY over the past day or two.  The Turkish repo rate is unchanged at 42.5%

I mentioned the nice weather yesterday and I think we’re in for more of the same today. Yesterday was the official start of spring so no wonder we’ve got great weather.  But don’t get excited, it doesn’t look like it’ll last into the weekend unfortunately. 

I see Eddie Jordan has passed away.  Jordan was the F1 team manager who gave Michael Schumacher his F1 debut back in 1991.  He was a flamboyant man, probably not everyone’s cup of tea but certainly a huge personality who put his heart and soul into anything he put his mind to.  He’ll be missed.   

In other news, plenty of talk doing the rounds that scientists have located a massive structure beneath the pyramids in Egypt.  It’s the sort of discovery I would love to see and I dearly want this to be true but unfortunately I think I’m going to be disappointed. 

And speaking of disappointment, anyone due to be flying in or out of Heathrow today will certainly be disappointed, as the airport has been closed all day due to a massive fire at a nearby electricity substation.  Outbound flights are grounded and incoming flights are being diverted.  Now, the cause of the fire is as yet unknown.  I don’t want to sound like a conspiracy theorist but as soon as I see something like this my first thought turns to possible sabotage.  OK, I do hope I’m wrong, but we have seen infrastructure such as undersea cables damaged, perhaps recent cargo ships targeted, why would sabotage by one of the less friendly nations not be possible?  Travel will be disrupted for today at least but I suspect the knock-on effects will last longer.

In sport, England play Albania this evening in the first match of the world cup qualifying campaign.  This is England first match under new manager Thomas Tuchel, there is hope that he’ll try to ignite some excitement and belief into the team that, on paper at least, has a great deal of talent but, as Tuchel has put it, previously looked like it played with a fear of losing rather than a desire to win. 

Also in weekend sport we have the Chinese F1 grand prix.  Hoping it’ll be another one where we see a mix of manufacturers taking the top positions rather than having just one dominating the season. 

Not much on the calendar today but it does liven up next week with GDP and inflation from both US and UK, plus UK retail sales and major PMIs from UK, EU and US.  For now though, my guess is the City bars will start getting busy into the afternoon as people begin to turn attention away from the screens and instead look longingly at the sun out of the windows.    

Have a great weekend….

-  12.30 CAD retail sales

-  13.05 Feds Williams speaks

-  15.00 EU consumer confidence