Good morning
Well I’m back from holiday and need to get back into the swing of working but its never easy hitting the ground running. Going to have to ease myself into this. My return hasn’t been helped by having some excellent weather away, it was hot but not as scorching as some European cities have endured. And since I’ve been back its been pretty cold and a bit wet. Of course its more pleasant this morning but that’s no good when I’m sitting at my desk. Mind you, Phoenix, Arizona is seeing temperatures at almost 50 degrees celsius and it will stay above 40 for the coming week or two at least. That’s too hot for even the most ardent sun-lover.
So what have I missed? Well without going back over all the old news, the key theme seems to be USD weakness. In my last report before I left I said ‘Will GBPUSD be up through 1.3000 when I get back?’. Well it certainly is, reaching a high last week around 1.3140, while EUR also enjoyed a push higher against the US Dollar, now 1.1240, within just a few pips of last weeks highs.
With GBPUSD currently 1.3090, GBPEUR is 1.1645, some 65 pips lower than before I went away and some 115 pips off last weeks highs. Lower US inflation last week seems to have been a key catalyst for the USD decline. Questions are being raised as to whether the Fed’s ‘skip’ at the last meeting may not actually be just a ‘skip’ but rather a longer pause or even an end to rate rises. We’ll find out at the upcoming Fed meeting next Wednesday. Meanwhile Goldmans have joined the list of those looking for a 50bps rate rise from BoE in August which would take rates to 5.5% with some now seeing a peak above 6% this year.
Yen has also benefitted from US dollar weakness. USDJPY had been up above 144 when I left but now trades 138.60, having seen a low last week of 137.30 or so. GBPJPY is lower, now 181.45, almost exactly in the middle of the 179.50-183.50 range we have seen over the past week. Britain have joined he CPTPP trade block in a £12 trillion deal meaning much of the UK exports to the region will soon be eligible for zero tariffs.
We saw some weaker than expected China GDP overnight but USDCNY fixed 7.1326, well down on levels seen before I left, helped of course by that weak dollar. Yellen has said that US are eager to work with China to de-escalate tensions but made clear it is far too early to expect firm news and certainly too early to talk about removing trade restrictions.
In other news, Putin has said Ukraine counteroffensive hasn’t been successful, UK government have warned of possible terrorist attacks although no details have really been given. In better news, yesterday market the 54th anniversary of the Apollo 22 launch that took Armstrong and co to the moon. They landed on 20th July so no doubt we’ll see plenty of old footage in the coming days. We’ll also have the conspiracy theorists explain why the moon landing wasn’t actually real. I have to say when we look at the issues facing modern space travel it is surprising that the feat was achieved over half a century ago, but surely someone would have let the cat of the bag before now if it was just made up. I see India have also sent a rocket to the moon in the past couple of days, no people on board Chandrayaan-3 but its still quite exciting anyway. It is due to land next weekend after a pretty long trip that sees it orbiting the earth a few times before being catapulted towards the moon.
Todays calendar is reasonably quiet but the week ahead looks like a busy one, with inflation numbers due from UK, EU, Canada, NZ and Japan, retail sales from US and UK, Aussie employment numbers and China PBoC rate announcement. That’s enough to keep us on our toes.
- 09.15 ECBs Lagarde speaks
- 09.30 ECBs Lane speaks
- 11.00 Bundesbank monthly report
- 13.15 ECB’s Elderson speaks
- 13.30 US NY empire state manufacturing index
- 02.30 RBA minutes
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