Good morning
Yesterday morning was something of a non-event, a perfect time to get some admin finished. All was calm and quiet until the afternoon, when we saw another bout of USD buying yet again. GBP was impacted to a greater extent, with GBPUSD trading down from 1.2825 to 1.2725, EURUSD to 1.0595 which meant GBPEUR dropped from its highs around 1.2080 to 1.2015. USDJPY took advantage of the stronger US dollar, trading up to 154.80.
The renewed USD buying came amid ongoing talk that Fed will have to slow the pace of rate cuts, and move them less than previously expected, in response to inflationary effects of potential tariffs. With ECB still on a fairly dovish rate path, I have seen some suggestions that EURUSD could hit parity by the end of 2025, a level we’ve not seen for two years. It is fair to say we’d thought a Trump win would lead to a higher US dollar but if I’m honest I didn’t think it would go
Things were generally more stable overnight, GBPEUR did dip below 1.2000 several times but is currently just above at 1.2010. USD has held most of its recent gains, GBPUSD is 1.2735, EURUSD 1.0600 and USDJPY now up at 155.20. Still nothing from Japanese officials regarding Yen weakness, as we know they cannot reverse this stronger USD theme but I am surprised that we have not heard a little bit more from them in terms of verbal intervention.
Fed officials yesterday were generally all on the same page. Most are pleasantly surprised at the resilience of the US economy Kashkari still sees a Dec rate cut as most likely bar any upward inflation surprises. Mester was more hawkish, saying the Fed could carry out fewer rate cuts through 2025 than previously expected, depending on Trump’s tariffs and other policies.
Trump has made several appointments to his new government, including Elon Musk who will head up the Dept of Govt Efficiency. I have long said that we need more business people running the country’s finances so I’ll be very interested to see how this turns out. I’m not sure Musk would be my choice, his fortune has been made with some rather hefty gambles, although I admit that ultimately they have worked out. I’d imagine he’ll certainly look to do things his way rather than be swayed by career politicians.
Today we have the latest US CPI inflation numbers, not expected to be very different to last time out but still capable of moving the markets if they end up away from expectations. We also have another raft of Fed officials speaking, I’m interested in how many of them mention the potential for fewer Fed rate cuts next year.
Overnight we’ll have employment and inflation numbers out of Australia. I would be surprised if either come in weak enough to move RBA away from their hawkish stance but it is fair to say AUD is looking a touch softer so far this morning, AUDUSD back to the support area I mentioned recently around low-0.65s, AUDNZD down to 1.1000 and GBPAUD up 50 pips or so to 1.9545.
Not much in the way of other interesting news or sport so i’ll leave it there for now. Have a great day, take It easy this mornig, the afternoon could be another lively one!
- 09.45 BoEs Mann speaks
- 10.00 EU industrial production
- 13.30 US CPI
- 14.30 Feds Williams speaks
- 14.45 Feds Logan speaks
- 18.30 Feds Schmid speaks
- 19.00 US Fed budget statement
- 19.10 Feds Musalem speaks
- 23.00 RBAs Bullock speaks
- 00.00 AUS consumer inflation expectation
- 00.30 AUS unemployment
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