Good morning
Welcome back after the long weekend, and what a pleasant weekend it was with some warm and sunny weather. Looks like we’re in for more of the same this week which is great for the kids on half term.
So what has been going on since Friday? Well the US dollar has made gains, particularly against EUR and JPY, EURUSD trading to 1.0680 and USDJPY hitting 140.90 at one stage, now 140.15. The move has been helped by talk of a debt limit agreement which, although not fully signed off yet, should be done so in time to avoid a default. In addition we are seeing more chance of Fed rate rise at the next meeting rather than the pause they had previously hinted at.
GBP however has held up pretty well, still 1.2350 against USD and up to 1.1560 against the EUR. Whether GBP can continue to hold gains or begin to weaken in line with the EUR remains to be seen but I have seen a few downside GBPUSD trade ideas for the next couple of months based on the idea that markets are overpricing BoE peak rates. GBPJPY is now 173.20, it did reach almost 174.00 overnight, highest levels since Jan 2016. The yen wasn’t helped when Ueda said inflation is still not at a sustainable 2%. I’m not sure what the right time to buy Yen will be but it’s a move I don’t want to miss, although we could be waiting for a long time at this rate.
This EUR weakness comes despite ECB officials still talking of the need for rate rises, do Cos making clear they still have some way to go and that rates will have to remain high for an extended period.
TRY is weaker after the Turkish elections saw Erdogan win in the run-offs. As you know I didn’t think his victory was in doubt, only mildly surprised he didn’t win first time around. One man cannot have all that power and now win an election. USDTRY has traded up to 20.33, EURTRY to 21.75, the markets clearly not liking the news.
Russian has been attacking cities across Ukraine with missiles and drones on pretty much a daily basis, while Moscow was hit overnight by a drone attack which the Russian defence ministry is blaming on Ukraine. There hasn’t been much in the way of attack on Russian soil as yet but in the past month or so there does seem to have been a pick-up in activity. Attacks on Moscow had been almost unfathomable, but now the war seems to be spreading. No one has taken responsibility, Ukraine are distancing themselves from the attacks. Expect more Russian attacks on Ukraine in reprisal.
Finally a final day of Premier League football saw Leeds and Leicester join Southampton in relegation to the Championship after what I think has been a pretty good season with surprises in many teams fortunes, both good and bad. Leicester going down was a shock, Chelsea finishing in 12th place after spending some £600m on players this season. That’s not great. Spurs finished 8th so not European football for us, that’s not great either. Now attention turns to transfers, I have a feeling we’ll see some big spending in the summer from some teams looking to rebuild.
Enjoy the weather. There isn’t much of a calendar this week from the UK, and I’m thinking it could well be reasonably quiet for us, assuming the US debt limit does get approved. US nonfarm employment numbers Friday afternoon could move the markets, a strong reading would only serve to increase the potential for a Fed rate rise in June and underpin the US dollar.
- 10.00 EU consumer confidence
- 13.30 CAD current account
- 14.00 US house price index
- 15.00 US consumer confidence
- 18.00 Feds Barkin speaks
- 00.00 RBAs Lowe speaks
- 00.50 Japan industrial production, retail trade
- 02.30 China manufacturing, non-manufacturing PMIs
- 02.30 AUS CPI
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