Good morning
Biden has finally confirmed Powell as his choice for Fed Chair with Brainard taking over from Clarida as Vice-Chair. US dollar is up a little on the news although not dramatically, both Powell and Brainard yesterday made it clear they will watch inflation closely and use tools to prevent higher inflation becoming entrenched. We are watching for further USD upside after Bostic became the latest Fed official to talk of faster tapering, saying it would give the option for earlier rate rises. Not the first comment we have heard about faster tapering, certainly something to watch for at the next Fed meeting in mid-Dec.
Covid remains in the headlines with stark warnings from many European nations as infection rates rise. The German health minister went so far as to say that by the end of winter they will either have been vaccinated, recovered or dead. Tough words but it does give an idea of how this wave is affecting them. I do remember last year Merkel gave a warning that with no action 60-70% of the German population would become infected. At the time I sent a note asking whether this was scaremongering or reality. Some twenty months later I think its pretty clear it was reality.
GBPUSD currently 1.3380, EURUSD 1.1265 which leaves EURGBP 0.8420 (GBPEUR 1.1880), GBP losing some of its recent gains against EUR after some better than expected PMI numbers from EU this morning.
Interest noted in Japanese Yen overnight as USDJPY traded above 115.00 for the first time in over 4 ½ years. The move was helped with a bit of USD buying after the Powell announcement, it was also a Japan holiday today which may have helped with the timing of the move. The move didn’t last long, USDJPY now trades 114.60.
US has announced plans to release oil from its reserves, in joint action with other countries. Should have an effect on oil prices although OPEC then suggested they might then have to re-evaluate their plans to increase supply. On that basis it is difficult for oil prices to slip too far.
RBNZ rate announcement tonight and a 25bps rise is expected following a 25bps rise last month. NZD is actually lower ahead of the release, NZDUSD now at 0.6935, the lowest level for over one month, while AUDNZD has pushed higher, now 1.0410 having been in the low 1.03s at the very start of the week. Some put this down to the fact market had been thinking about a 50bps rise, that has now been priced out. No other RBNZ meetings until Feb, if we do see NZD tick higher we could well see sellers on rallies. There would surely be little to drive NZD higher, there is talk the Auckland border will reopen in mid-Dec which must surely bring higher Covid case numbers, which in turn will make life difficult for NZD.
Finally I suppose I should mention the Boris Johnson speech to business leaders yesterday, where he completely lost his place and after twenty second of moving his papers he went off at a tangent talking about Peppa Pig World. Johnson obviously open to ridicule, some call it shambolic, some talk of concern over Johnson and his well-being, Johnson insisted he had still got his points across. Having spoken a few times in public I am well aware that losing ones place in a speech is a rare but unpleasant experience. I’m not saying he has my sympathy but I’d love to see many of his critics do better.
- 09.00 EU markit manufacturing, services PMIs
- 09.30 UK markit manufacturing, services PMIs
- 11.00 BoEs Haskel speaks
- 14.45 US markit manufacturing, services PMIs
- 18.00 BoCs Beaudry speaks
- 18.40 ECBs de Guindos speaks
- 22.15 RBAs Bullock speaks
- 01.00 RBNZ rate announcement
- 02.00 RBNZ pres conference
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