US bond yields higher, USD struggles, Bitcoin at record highs. But who cares because Spurs won the cup...

Good morning

Well let’s start with the most splendid news from last night.  Yes, Spurs beat Man Utd to win the Europa League final, in doing so gained entry to the lucrative Champions League next season and also hopefully puts an end to all those ‘Spurs don’t win trophies’ comments that have plagued the club since they last won silverware back in 2008, which in turn had been their first trophy for nine years. 

While the result was perfect, it wasn’t a great game, both teams lacking in quality which highlights why they are down near the bottom of the league table.  I’m sure there will be many questions asked as to how Spurs, and it could have been Man Utd, gets into the most prestigious tournament after such a horrific season, but them’s the rules and I for one am not arguing. 

The question now is whether Ange, the Spurs manager, keeps his job.  He says he is in the process of building the team into something special but they look far from a special team right now.  The most interesting thing last night was how Spurs changed their tactics for this match, choosing to defend deep rather than Ange’s usual ‘attack at all costs’ idea.  Ange has been criticised heavily this season for sticking with his attacking plans when it clearly wasn’t working, and now at last he’s changed and it paid off. 

Anyway, we’re not here to talk football.  To the markets, and the ‘sell US’ theme is certainly still with us.  US equities dropped around 1.5-2.0% yesterday, while their 10 year bond yields are almost 4.6% and the 30 year yield which had been as low as 3.9% back in Sept 2024, is now approaching 5.1%, a weak 20 year Treasury auction yesterday, perhaps led by concerns over Trump’s tax and spending bill, not helping at all.

GBPUSD has held above 1.3400, EURUSD has held above 1.1300 and USDJPY is currently near the lows around 143.35, all highlighting the weak USD theme.  Very difficult to see what will turn this, and we start asking the question of ‘What comes next in GBPUSD, 1.30 or 1.40?’.  At the moment you’d have to have your money on 1.40, surely?  Of course, now I’ve said that, we’ll be at 1.30 this afternoon!

Elsewhere, S&P have warned of risks to New Zealands rating, which pushed NZD lower.  AUDNZD is now 1.0870, GBPNZD back up towards 2.2650, not far off the recent highs. 

Trump has said to EU leaders that Putin isn’t ready for peace, something I’ve been saying for a while but it’s taken some time for Trump to get it.  Therer is still some hope for a ceasefire with Ukraine and Russia potentially due to meet next week in the Vatican, but I think Russia will make too many demands for Ukraine to be able to agree to much.  Whether the recent US/Ukraine minerals deal has any impact remains to be seen, but I can’t see Trump being happy if his ‘assets’ in Ukraine start coming under threat.

Bitcoin, one of my least favourite things in the financial markets, has benefitted from the weaker USD to push to record highs of almost $112,000.  I have to mention the poor guy who lost his hard drive with the password for 8,000 Bitcoin in a rubbish dump in Wales.  That is now worth almost $900m.

Today’s main events are EU, UK and US PMI’s.  We also hear from BoEs Pill and Dhingra.  Pill voted for unchanged rates at the last BoE meeting, while Dhingra called for a 50bps reduction, quite a difference of opinion there.   Worth watching for any headlines regarding EU /US trade talks, I’ve seen a few comments suggesting that some sort of tentative contact has been made.  The latest UK retail sales figures will be released early tomorrow morning, I’m never confident with those. 

Have a great day…

-  09.00 EU manufacturing, services PMI

-  09.30 UK S&P manufacturing, services PMI

-  11.50 BoEs Breeden speaks

-  12.00 BoEs Dhingra speaks

-  12.30 ECB minutes

-  13.30 BoEs Pill speaks

-  13.30 US initial jobless claims

-  14.45 US S&P manufacturing, services PMI

-  15.00 US existing home sales

-  16.00 ECBs Elderson speaks

-  16.35 ECBs de Guindos speaks

-  19.00 Feds Williams speaks

-  19.30 BoCs Macklem speaks

-  23.45 NZ retail sales

-  00.01 UK GfK consumer confidence

-  00.30 Japan CPI

-  07.00 UK retail sales

UK inflation comes in higher than expected, GBPUSD higher

Good morning

Another reasonably meaningless day yesterday, European equities were generally higher led by the UKs FTSE 100 which posted a near 1% rise, US equities were not so positive, mostly ending lower, the S&P ending a six-day winning streak.  Feds Hammack has said she sees lower growth and higher inflation in the US economy, Daly added that the Fed doesn’t yet have enough information make a decision on rate changes and Bostic said the recent Moodys downgrade just adds to the uncertainty and makes ‘sit and hold’ approach by the Fed more appropriate.  US 10 year yields which are now 4.5% having been down around 4.25% just a couple of weeks ago, as Trump continues to try to find approval for his tax and spending bill.

In currencies we saw pretty tight ranges, GBPUSD mostly within a 1.3335–1.3375 range, EURUSD 1.1225-1.1265.  Overnight we had further USD weakness which took GBPUSD above 1.3400 and then this morning’s stronger than expected UK inflation numbers, led by higher household bills such as food and car tax, sent GBP higher still, GBPUSD reaching almost 1.3470.  Still, EURUSD has also pushed higher, reaching the 1.1350 area at one stage which means GBP is actually slightly lower against EUR despite the higher inflation readings, currently 1.1850, with GBPUSD 1.3420.

Gold prices have pushed up $100 or so from this time yesterday morning, driven by reports that Israel are planning to attack Iranian nuclear facilities.  There had been some hope of a de-escalation of hostilities in the region but with Israel moving further into Gaza, the prospect of peace looks far away.  USD weakness is also evident against Yen, with USDJPY slipping to mid-143’s earlier this morning, perhaps also something to do with a safe-haven play. 

In other news, debate still rages on over whether the UK/EU deal is a good thing or a bad thing.  Regardless, Labour will be relishing the idea of having made trade deals with US, India and EU, and now talk of a possible Middle East deal.  They won’t be liking the talk that they may reverse the winter fuel allowance, or that Reeves may indeed have to raise taxes to pay for her spending plans, despite having promised that won’t happen.  Who’d be a Chancellor hey?  Perhaps someone qualified next time?

In football, Palace and Man City both won yesterday, beating Wolves and Bournemouth respectively.  The season ends this weekend with all teams playing on Sunday at 4pm.  If I’m not mistaken five clubs are still fighting for a European place so for some there is still everything to play for. 

The big news of course is the Europa League Cup final this evening between Spurs and Man Utd, two teams who have severely underperformed in the league and who will be looking to bring some light to an otherwise dismal season.  T0O the victors, not only a cup which both will relish but Spurs would really love in order to get everyone off their backs about being trophy-less for so many years, but also entry into next seasons Champions League, which brings both kudos and riches to the club.  Man Utd are slight favourites and I hate to say it but I may have to go along with that.  We can but hope!

Not much on the calendar today other than a few central bank officials, overnight’s NZ budget looks to be about the most interesting, tomorrow things hot up a bit with EU, UK and US PMIs.

Have a great day…

-  09.00 ECBs de Guindos speaks

-  17.00 ECBs Lane speaks

-  17.15 Feds Barkin speaks

-  00.00 AUS manufacturing, services PMI

-  03.00 NZ budget release

Is Trump overplaying the chances of peace in Ukraine?

Good morning

After a morning of USD selling yesterday following the downgrade of the US by Moodys, the markets calmed through the rest of the day.  US equity markets finished marginally higher, reversing early losses, currencies were generally unexciting.  GBPUSD ended London hours around 1.3355, EURUSD around 1.1230. US 10 year bond yields had ticked higher through the day but they too were pretty much back to their starting point by the US close. 

This morning we have a slightly weaker US dollar once again, GBPUSD 1.3385, EURUSD 1.1270 and USDJPY down to 144.20 and I wouldn’t be at all surprised to see the pressure on USD mount as the day goes on.

Very difficult to know what to make of the US as it currently stands.  Yes, a huge, strong and pretty stable economy, and as we have seen many countries are eager to make a trade deal rather than face large tariffs as they still look to tap into the US markets.  But a huge deficit and massive debt are also present which makes life very difficult.   Still plenty of talk that inflation as a result of tariffs is yet to fully hit the US economy and that risks of a US slowdown are being underplayed.  Stagflation is not off the table.  Meanwhile Trump’s proposed wide scale tax and spending cuts   could also add several trillion dollars to the US public debt.

And on trade, China seem to be playing a tough hand, saying they would prefer to go it alone than surrender to bad US trade terms.  But does all this lead to a softer US dollar?  Perhaps not.  The Bank for International Settlements have warned of a possible rush for US dollars if certain FX swap positions are unwound, particularly if US market volatility increases. 

Some interesting soundbites coming out of the UK/EU talks which created a bit of excitement but with very few real details.  Fishing quotas and UK food exports to the EU were all discussed and as part of the deals, UK passengers will be able to use EU e-gates although exactly where and when this will come into effect remains to be seen.  All very vague, as was the youth mobility scheme that so far just sees an agreement to talk about it rather than put any firm plans into place. 

What we don’t know yet is whether the deal really is any good or whether we’re being short changed for the sake of a few headlines.  I’d really like to think we are getting something out of this, the fact we are even at the table is a good thing but looking at some of the headlines there is a lot of unhappiness about the deal, particularly the fishing quotas that we have now granted for the next twelve years or so.  Tory leader Badenoch called it a ‘surrender’ while Farage said the fishing industry had been sold out. 

Trump and Putin spoke for some two hours yesterday.  Putin said the call was ‘meaningful’, Trump was far more upbeat suggesting it would lead to ceasefire talks between Ukraine and Russia immediately, although it would appear that there is actually no timescale for such talks.  Russia, I fear, are still preparing for another large offensive in Ukraine and Trump’s promise to Putin of a post-ceasefire trade deal may well be ignored. 

Overnight we’ve had the RBA rate announcement where they did indeed cut rates by the widely expected 25bps to 3.85%.  AUD is a touch softer after the announcement, GBPAUD up around 2.0835 as I type, AUDUSD at 0.6420.  RBA did talk of the huge uncertainty in the global economy right now, mostly as a result of US tariffs and the response to those by other countries.  They see risks to inflation as more balanced but do see it pushing to the top of their band through 2025.

Liverpool lost to Brighton yesterday evening in a match that certainly meant more to Brighton as their hopes of European football are kept alive into the last game of the season. Its Palace v Wolves this evening, with Palace fighting for a finish in the top half of the table to go with their FA cup win.  We also have Man City v Bournemouth this evening, City really need a win to improve their chances of Champions League football next season. 

The latest inflation data from Canada is out this afternoon, otherwise we’ve mostly got Fed officials speaking once again.  Early tomorrow morning we’ll get the latest UK inflation numbers, expected to show a sharp rise from last month. 

-  09.00 BoEs Pill speaks

-  13.30 CAD CPI

-  14.00 Feds Barkin speaks

-  18.00 Feds Musalem speaks

-  22.00 Feds Kuglerf speaks

-  23.45 NZ trade balance

-  00.00 Feds Daly, Bostic, Hammack speak

-  00.50 Japan trade

-  07.00 UK CPI, RPI, PPI