Good morning
We return to our desks to find a stronger US dollar. Nonfarm payroll headline came in at +339k from an expected +190k, while the previous month was also revised higher. This was slightly tempered with a higher unemployment rate but overall the market saw this as a sign the economy is still powering ahead and as such rate rise expectations for June have risen. JPMorgan have said that US rates should head to 5.5% and that a recession is likely. We are now in the blackout period ahgead of the Fed meeting so we won’t be hearing from any Fed officials.
GBPUSD has been around 1.2530 Friday morning, that now trades down at 1.2390 while EURUSD which had been up at 1.0770 Friday is now 1.0685. GBP has certainly lost more ground than EUR, GBPEUR now sits just around 1.1600 having been up above mid-1.16s last week. USDJPY has powered ahead, now 140.40 with eyes on possible intervention by BoJ although nothing seems to have been said so far, unlike last week when Japan reported meetings with monetary authorities to discuss the weak Yen. GBPJPY up to 174.00, EURJPY now 150.00. USDCNY fixed 7.0904.
Oil prices have jumped higher after Saudi Arabia announced a cut in production in an effort to keep prices up, while OPEC countries have extended cuts that were going to end in 2023, they will now go until end-2024. I’m not sure how this will sit with ECBs Visco who earlier had said that falling energy prices should help bring inflation lower. Visco did add that he hopes firms don’t keep prices artificially high for windfall profits, something I believe is happening across multiple sectors. Lagarde speaks later today but she rarely says anything that has significant market impact.
I offered a couple of cheapish trade ideas Friday looking for a bit of a move in GBPUSD or EURUSD after the US employment numbers. Pleased to say these have worked a treat, GBPUSD more so then EURUSD on this occasion, which in buying spot against our options here guarantees a profit of over 100% on the premium we paid. Lovely.
RBA rate announcement in the early hours of tomorrow morning. No change is expected after their 25bps rise at their last meeting in early May. You may recall that back then the market was looking for no change but I had warned of the potential for a rate rise. This time round though I don’t think another rise is really on the agenda. GBPAUD sitting at 1.8800, almost 400 points off last weeks highs.
It was a great weekend, I didn’t end up going to the Epsom Derby, I was dropped in favour of one of his mates, so I’m probably better off now than I would have been had I gone! Got to watch the FA cup final instead, not a bad match with a couple of excellent goals including the fastest ever goal in an FA cup final, plus a particularly dubious penalty which highlights how daft the handball rules are in their current form. They are not correct now but it must be very difficult to rewrite the rules in a way that will never cause arguments as to its interpretation.
Have to get a new passport for my son. It expires in August but we’re looking to go away around then and I thought I’d get it done well before time. As I was about to complete the application, I was warned the new passport could take up to ten weeks to arrive! So I looked at the fast track offering where you physically take the passport form to the passport office and the new passport should arrive within a week. The only passport offices with appointments? Durham, Belfast and Liverpool. Seriously? Whatever I spend on getting this passport renewed should come off my taxes.
- 09.30 UK S&P composite PMI
- 14.00 ECBs Lagarde speaks
- 14.45 US S&P services, composite PMI
- 15.00 US services ISM, factory orders
- 15.00 ECBs Nagel speaks
- 00.01 UK BRC retail sales
- 00.30 Japan household spending
- 05.30 RBA rate announcement
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