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
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