Good morning
I hope you had a terrific weekend. The weather was pretty fantastic, with temperatures in the mid to high 20’s. It felt a bit like summer at last. I’d love to say I spent the weekend sitting outside enjoying the sunshine, but alas it was not to be. My daughter was moving into a flat with some friends and our time was spent ferrying her belongings to the new pad. I couldn’t do much of the heavy work due to my recent shoulder operation, more disappointingly I couldn’t drive the van we hired. I love driving vans for some reason, but had to be the passenger this time. Anyway, she’s moved in, another one of those milestones in life has been reached.
My mention last week of filling the £20bn funding deficit led to many responses. I must admit it did all get a bit daft, we do know teachers and nurses are underpaid and as was pointed out, how on earth can a junior doctor earn less money than a train driver! Some suggestions came in of how to better deal with the spending gap, many readers are business owners who frankly know more about the real world than those at the helm in government or opposition. Between the readership here we probably have the makings of a pretty decent cabinet.
We’ll hear from the Chancellor this morning about just how bad the funding shortfall is, and how she intends to deal with it. Expect some infrastructure projects to be cut, but I’m not sure if she’ll yet talk of higher taxation. GBP has been struggling over the past couple of days and this morning is a little lower again, with GBPUSD falling through last weeks lows of 1.2850 to reach 1.2825 as I type, and GBPEUR dropping to 1.1830. It is of course a big week for GBP, with the BoE’s latest rate announcement due on Thursday. A 25bps cut is the consensus forecast but as I mentioned last week it is likely to be a close vote, something like 5-4, so could very easily stay at unchanged.
It’s a pretty packed calendar this week, plenty of potential for volatility. Tomorrow sees EU GDP and German inflation, Wednesday we have Aussie inflation and BoJ rate meeting before we even get to our desks, followed with EU inflation and the US FOMC rate announcement, Thursday is the BoE rate announcement and also the latest ISM data from the US, while Friday afternoon we have the latest US nonfarm payroll data. Of the three major rate meetings, Fed are expected to stay unchanged, the firmer than expected PCE deflator last Friday makes a US rate move a difficult sell, BoE to cut 25bps and BoJ to possibly raise rates, but that is far from a done deal.
Elsewhere, commodity currencies continue to look weak, GBPAUD and GBPNZD are holding up pretty well despite the GBP weakness, at 1.9600 and 2.1840 respectively, while against the US Dollar they are both at or near recent lows. Of the two, its NZD that I having the worst of it, with AUDNZD up at 1.1130, the highest level since Oct 2022. It wasn’t that long ago we were talking about possible RBNZ rate rises, they now look a thing of the past and a rate cut is now not a matter of ‘if, but ‘when’, and how many may come in 2024.
Politicians on all sides are doing what they can to ease tensions in the Middle East, fearful that recent attacks on Israel and Hezbollah in Lebanon could turn into a full-blown war.
The Olympics are in full swing. I didn’t see the opening ceremony but understand it was a little contentious, although not having seen it means I am in no position to offer an opinion. I can’t comment much on the games themselves having not really been around to watch much TV, however I’ll have it on in the background today. Tom Daley will be looking for another diving medal with his partner Noah Williams. I did see that triathlon training in the Seine was cancelled due to the poor water quality following heavy rain Friday and Saturday, the event is due to begin tomorrow and I really can’t see how they can make significant changes before then. Organisers are confident all will be well.
That’s about all I’ve got time for, somehow I’m running ,later than ever. Can’t believe it will be August this week, this year is just slipping away so quickly. See if you can get away from your desk to enjoy the sunshine for a bit while it lasts. Could be touching 30°c here over the next couple of days.
- 10.00 UK chancellor Reeves speaks
- 00.30 Japan unemployment
- 02.30 AUS retail sales, building permits
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