Good morning
Three of the nine BoE officials voted to cut rates yesterday, not enough to win so rates are held at 4.75%, but enough to offer more of a dovish sentiment than the market was expecting. GBP duly dropped, GBPUSD which had been up around 1.2650 fell initially to 1.2585, only to then be given another push lower as USD strengthened after a stronger than expected US GDP release. Ramsden and Taylor joined Dhingra in calling for a rate cut.
BoE are still concerned about upside inflation risks but they are now equally concerned about weak demand going forward that could upset the economy and push unemployment higher. The recent budget is also likely to hamper growth, with GDP forecasts for the final quarter of 2024 cut from 0.3% to 0%. Bailey gave no real clues as to the rate path for 2025, but market pricing of three 25bps cuts seems reasonable for now, starting with a possible 25bps cut in February.
Disappointing UK retail sales numbers this morning have helped GBP move even lower. GBPUSD fell further to 1.2475 overnight, while GBP crosses also shifted lower. GBPEUR traded lower from a high yesterday around 1.2160 to current levels around 1.2035, while against AUD, NZD and CAD we’ve seen GBP drop to 2.0025, 2.2165 and 1.7980 from highs yesterday of 2.0300, 2.2400 and 1.8230 respectively. Quite an impact.
USDJPY continued its march higher, trading up to almost 158.00 overnight, however higher than expected inflation numbers from Japan, plus some carefully worded comments from Japanese FinMin Kato and top currency diplomat Mimura about ‘sudden, one-sided FX moves’, saw Yen regain some its losses, USDJPY now 156.90. A BoJ rate rise in March still looks more likely than January.
Spurs beat Man Utd to claim the last of the league cup semi-final places. Spurs were 3-0 up but of course had to make life difficult and Man Utd fought back strongly late on, leaving the final score at 4-3. Never a dull moment with Spurs. This weekend brings premier league action, the highlight is likely to be Spurs v Liverpool, obviously I’ll not be expecting too much from that.
This weekend we have boxing as Tyson Fury once again takes on world champion Usyk on Saturday night. Could be quite a thrilling bout and certainly one to stay up for.
We’ve had the key data this week and certainly plenty of volatility. US core PCE this afternoon could create one final blast of USD movement, surely after that we can begin to wind down for the holiday period?
- 13.30 US Core PCE, personal income/spending
- 13.30 CAD retail sales
- 15.00 US Michigan sentiment survey
- 15.00 EU consumer confidence
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