Good morning
US GDP yesterday came in softer than expected with an annualised rate of 2.8% vs 3% that had beeen expected. However the market seemed to place more emphasis on the stronger than forecast ADP employment numbers and USD showed signs of strength with GBPUSD trading as low as 1.2935 and EURUSD 1.0810.
As Chancellor Reeves spoke, GBPUSD pushed higher to 1.3040 and it would easy to think this was down to the market liking the budget, but over the same period EURUSD also pushed higher to 1.0850 so it is reasonable to put a lot of this down to a gernally softening USD. However GBP seemed to be the main beneificiary, with GBPEUR trading from a budget low of 1.1965 up to 1.2020. Since then the market has had time to digest the budget, GBP has lost ground, GBPUSD is now 1.2980 and with EURUSD holding up in the mid-1.08s, GBPEUR is back down at 1.1960.
So, the the UK budget Now I’m not an economist so I’m not going to try to second guess how good/bad/indifferent it may be and I’m not going to offer a comment as to whether this idea of changing the accounting model should mean its ok to borrow more and more money. From what I gather so far though is companies will foot the bulk of the tax rises with huge employer national insurance contributions. But regardless of Labour promises it is impossible to raise money through higher taxes without the man on the street feeling it.
The additional funding for the NHS and education is much needed I know, but I see these as vitally important but hugely inefficient opretations, and just throwing more money at them isn’t going to make any lasting reforms and that’s regardless of which party is in power. I don’t regard that as investment in public services, it is just money that will be spent and disappear as quickly as it comes in.
One part that Reeves seemed to add in which went midly unnoticed was the idea of bringing pensions into inheritance tax calculations. I’ve not looked too deeply into this so I’m not sure of the overall impact but sounds a bit sneaky to me. Anyway I try to remain reasonably apolitical for the purposes of this daily write-up so i’ll leave it there for the time being. However I will say that this must surely make decent rate cuts less likely, but that isn’t likely to support GBP.
Elsewhere, BoJ left rates unchanged overngiht as expected, but some suggestions of further rate rises to come has sent USDJPY lower from 153.40 or so to 152.10, GBPJPY in turn is well off recent highs at 197.45.
In other news, I have seen some pretty horrific pictures coming from Spain after a whole years worth of rain fell in just eight hours, causing flash flooding that has claimed the lives of around 100 people, with the death toll still likely to rise. Scenes of cars and debris piled up in narrow streets look like something out of a film rather than real life. ‘Devastating’ only just begins to describe it.
In football, Spurs managed to beat an under-strength Man City side to get through to the quarter finals where they will face Man Utd, who won their first match under Van Nistelrooy by beating Leicester 5-2. The quarter finalists are all premier league teams, the first time this has happened in 14 years.
So, to today. We have EU inflation this morning and then more US employment numbers, this time challenger job cuts and intiial jobless claims. These are not the biggest set of employment data but we know the Fed are watching the labour market closely, Tomorrow’s nonfarms are of course the bigger news. Also today from the US we have core PCE deflator and chicago PMI, both potential market-movers.
Have a great day, can’t quite believe it’ll be November tomorrow.
- 10.00 EU HICP, unemployment rate
- 11.30 US challenger job cuts
- 12.30 US Core PCE, initial jobless claims, personal income/spending
- 12.30 CAD GDP
- 13.45 US chicago PMI
- 22.45 NZ building permits
- 01.30 AUS PPI
- 02.45 China caixin manufacturing PMI
Commenti