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

FOMC dovish but keep rates on hold for now, BoE up next

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.

FOMC did leave rates unchanged yesterday as had been widely expected, although the markets were taken a little by surprise that the interest rate projections came in lower than they did last time, with a 50bps cut being eyed this year compared to no change from the last projections.  Powell made it clear that the risks for the economy were now to the downside amid so much uncertainty, lower growth and higher inflation is never a good combination.  Even so, Powell did play down the chances of a recession in the US.

Trump has since come out and said the Fed should be cutting rates to help ease the impact of tariffs that look certain to being on 2nd April, in fact Trump went so far as to say 2nd April will be ‘Liberation in America Day’. 

The US dollar, which had pushed a little higher into the announcement, weakened with GBPUSD trading back up to break recent highs, reaching 1.3015 overnight, while EURUSD managed to hit 1.0915.  GBP has clearly had the better of it, with GBPEUR trading up to 1.1935 from a low yesterday morning around 1.1880.  UK employment numbers this morning were a touch better than expected.

Both GBPUSD and EURUSD are off those highs now, a bout of USD buying did see them trade to 1.2960 and 1.0865 this morning, both currently around 15 pips off those lows.

The lower USD saw gold make yet another record high, reaching almost $3,060 in the early hours of this morning, as geopolitical unrest and official demand continue to support prices.

Overnight we had NZ GDP and Aussie employment data.  NZ GDP was a mixed bag, coming in better than expected but with hefty downside revisions to the previous readings.  Aussie employment numbers were poor with a fall of 53,000 in jobs when a positive 30,000 or so had been expected, again we saw downside revisions to the previous months data.  AUDNZD has been heading lower for the past week or so and did hit a five month lower around 1.0910 overnight, but is off its lows at 1.0955 as the markets try to figure out which country is in worse shape.

We have a Turkish central bank rate announcement today, rates are currently at 42.5%.  TRY saw plenty of volatility yesterday as it was reported that Imamoglu, one of Erdogan’s key opponents, had been detained, triggering sharp falls in equity markets there.  Concerns rise that Erdogan is stamping his authority in a pretty undemocratic way.   USDTRY spiked to all-time highs at over 40.00, now back near 38.00.  It had seemed for a while that Turkey’s reputation in the global arena had been improving.  This certainly won’t help.

We also hear for the South African central bank today, there is mixed feeling here as to whether they keep rates on hold or but by 25bps.  Unchanged rates seems marginally the more likely.  Meanwhile SNB have cut rates by 25bps this morning, a move that was expected, even so EURCHF ticked up 50 pips or so to 0.9580.

Today the latest Band of England rate decision will be announced.  Everyone is looking for unchanged rates, however we will be looking at the vote split as well the scale of cuts voted for by dissenters.  You’ll remember that Mann surprised the markets by turning from hawk to super-dove at the last meeting, voting for a 50bps cut.  I’ll be interested to see whether she follows suit this time.  BoEs main dove, Dhingra, likely to vote for a cut, just remains to be seen what size.  Overall, a 7-2 split in the voting looks most probable.

A 25bps cut in May is being touted and some are still looking for a total 75bps of cuts this year.  We do have the UK spring budget next week where large spending cuts are likely to be announced given Reeves previously ruled out further tax rises.

In other news, Canada’s Carney has suggested Canada could join a new EU military project to decrease its reliance on the US.  Carney has called the EU ‘reliable allies’ as he continues to speak of the disrespect Trump has shown for Canada.  Ukraine’s Zelensky is due to address EU leaders today following his phone call with Trump yesterday, where Trump expressed interest in taking over Ukraine’s nuclear power facilities.   

So, a pretty full calendar today but a decent chance it could come and go with minimal fuss.  A brave call given the many issues facing the markets right now.  I’m, hoping its quiet, the weather forecast suggests we could see temperatures of almost 20°c this afternoon, its been a long time since I felt that sort of warmth outdoors.  I’ll be on my mobile….

Have a great day

-  08.30 SNB rate announcement

-  09.00 SNB press conference

-  09.00 ECB economic bulletin

-  11.00 CBRT rate announcement

-  12.00 ECBs Lane speaks

-  12.00 BoE rate announcement

-  12.30 US philly fed survey, initial jobless claims

-  13.00 SARB rate announcement

-  14.00 US existing home sales

-  18.05 BoCs Macklem speaks

-  21.45 NZ trade balance

-  23.50 Japan CPI

-  00.01 UK GfK consumer confidence