Ceasefire looks broken as US/Iran trade shots

Good morning

I’m back from a few days off, been in Paris which I have to say was better than I’d remembered.  We set off the morning of the England world cup win over Mexico, an early start meant we had little sleep but an easy Eurostar service to the centre of Paris set us up for a pretty full-on but worthwhile trip.  My step-counter showed some pretty impressive numbers despite temperatures approaching the mid-30’s, all in all a very pleasant few days.

I arrive back to see that US and Iran have traded military strikes although financial markets seem to be shrugging that bit of bad news off for the most part, Asian stocks were  up overnight and most European markets are positive this morning.  Oil prices are up although currently approximately $3 off the highs seen yesterday evening.  Trump says Iran wants to continue negotiations but we know better than to be optimistic and indeed Trump himself has said he doesn’t necessarily trust Iran to honour any deal made.

 In terms of currencies, nothing is too far for where I left them last Friday.   The US dollar is a bit softer after last week’s nonfarms, EURUSD is 1.1435, GBPUSD is 1.3420, GBPEUR 1.1735 and we see 1.9350, 2.3425 and 218.00 for GBP against AUD, NZD and JPY.  The latter come as USDJPY continues to trade in the 162’s with no real sign of official intervention.  NZD has been reasonably volatile, seeing 2.3350 earlier in the week, then 2.3530, back to 2.3350 before heading above 2.35 again, now 2.3425.  Some of this volatility stemmed from the RBNZ raising rate 25bps in the early hours of Wednesday morning which gave NZD a short-lived boost.

FOMC minutes yesterday evening were scrutinised given it was Warsh’s first meeting as Fed chair.  Most members saw increased upside risks to inflation while downward pressure on employment seems to have moderated.  Even those who would have preferred a rate rise were happy to go along with the majority.  The accompanying statement was much shorter in line with Warsh’s dislike of forward guidance, something most members seemed to agree with.

I’ll keep it short this morning as I try to get back into the swing of things, I’m sure I’ve missed some things from when I was away but I see little point in going back and digging up news and data that you probably already know. 

Have a great day…

-  10.30 BoEs Breeden speaks

-  13.30 US initial jobless claims

-  14.00 Feds Williams speaks

-  15.00 US existing home sales

US holiday today could see markets grind to a halt

Good morning

A US nonfarm headline of +57k and a revision downward of previous months data yesterday disappointed the markets enough to send USD lower, with GBPUSD reaching 1.3380 and EURUSD 1.1470 through the afternoon.  The headline was more disappointing given there had been a thought that the world cup would generate firmer employment.  The market ignored the better than expected unemployment rate that ticked down to 4.2%, the general feeling suppose is that the softer headline could be enough to persuade the Fed to avoid rate rises in the coming months. 

GBP continued to enjoy its push higher against EUR, reaching 1.1700 at one stage as the market digested the news that we shouldn’t be expecting any rate cuts from BoE any time soon, while also pricing down chances of further ECB rate rises.  In the crosses GBP is 1.9250, 2.3355 and 215.00 against AUD, NZD and JPY.

We saw a couple of sharp dips in USDJPY yesterday, one I reported in the morning report, the other came a little later in the afternoon which took the pair from 161.60 to 160.65.  This morning we have seen a simllar move that took USDJPY from around 161.00 to 160.50.  Once again, it wasn’t the largest move but served as a reminder of the risks of going long USDJPY amid intervention threats.  If this was official action I think its pretty well timed, putting a stop to the relentless Yen depreciation, at least for the time being. 

As you know I had thought they would use the US holidays and the reduced liquidity to help the impact of their USD selling, difficukt to know if I’m right or if its just a bit of profit taking ahead of the weekend.  Worth noting that Reuters reported Japan are changing ther intervention methods, reducing the verbal warnings in order to inflict maximum surprise on the markets when they do decide to take action.

Not a great deal on the calendar today although Lagarde and Bailey speak through the day.  It is a US holiday today so expect things to really slow down as we head into the afternoon.  As we look ahead to the weekend the weather is getting warmer and then hits highs of 30°c as we move into next week.  If its too warm for you outside there is plenty of sport to enjoy on the TV including the British F1 grand prix, tennis from Wimbledon, cricket with England taking on India in a T20, the Tour de France and international rugby with England taking on South Africa on Saturday afternoon.

All that is besides the world cup, where the last matches in the round of 32 wqill be played and then straight into the last 16 on Saturday when Canada takes on Morocoo and Paraguay face a formidible France.  In the very early hours of Monday morning, England will take on Mexico.  England are arriving in Mexico a couple of days ahead of the match, not sure that’s enough time to get them used to the altitude there but they’ll do what they can.  The England team hotel is being kept a secret after Ecuador complained their players were kept awake by constant loud music and fireworks set off by Mexican fans.  Not much chance of that location being kept secret, I’d imagine.

It will be a tough match for England and a tough  one for the fans as well.  If the match goes to extra time and penalties we may not get to bed until 4am, so expect a few bleary eyes in the office on Monday.  It’s possibly worse for me.  I’m off to Paris for a couple of days, I’m getting picked up from here at 4am Monday morning which means there is a chance I’ll get little or no sleep.  Even a nap on the Eurostar won’t be great given its such a quick service.  And if you think of complaining about the heat, just remember i’ll be facing 35°c temperatures while wandering around Paris.  It’s a tough life!

I am not back until late on Wednesday so don’t exect any reports until Thursday.  I’m adding the calendar for the start of the week here, its not the busiest week but we do have the RBNZ rate announcement in the early hours of Wednesday morning.  It is thought they will raise rates 25bps to 2.5% after the last RBNZ meeting which surprised with a far more hawkish tone than exepcted, backed up by several comments from RBNZs Breman since.  Current levels for NZD are 2.3355, 1.2135 and 0.5720 agaisnt GBP, AUD and USD respectively.

Have a great day, and a great weekend as and when it come.  

-  09.00 ECBs Lagarde speaks

-  09.00 EU composite PMI

-  15.30 ECBs Nagel speaks

-  16.00 BoEs Bailey speaks

Monday

-  10.00 EU retail sales, PPI

-  14.45 US S&P composite PMI

-  15.00 US ISM servies PMI

Tuesday

-  10.30 UK BoE financial stability report

-  15.00 CAD Ivey PMI

Wednesday

-  03.00 RBNZ rate announcement

-  19.00 FOMC minutes

GBP up as Bailey discounts chances of a rate cut this year

Good morning

We’ve had a bit of a change in the markets.  GBP is up above 1.3300 against USD, now 1.3320, but EUR has lagged, still around 1.1400 which puts GBPEUR at 1.1685, its highest level for over a year having finally broken above that 1.1600/20 area that capped the upside for so long.  Perhaps Bailey’s comments yesterday that rate cuts are off the table for the time being was enough to give GBP a bit of a boost.  

We’ve also seen a sharp move lower in USDJPY this morning, the pair had drifted from overnight levels around 162.50 to 162.20, then dropped to 161.15 in a matter of minutes.  While the move may have looked like intervention, it wasn’t particularly big in the scheme of things and as i type the pair is back up to 161.75.  Whether it was official action or not remains to be seen but it will put traders on alert ahead of the US holidays, I’ve warned several times this week that Japan may take advantage of reduced liquidity ahead of the US holidays.  The USD selling saw GBPUSD and EURUSD spike briefly as well.

Feds Warsh gave little away in comments yesterday, but made it clear once again that we shouldn’t expect anything in the way of forward guidance when it comes to Fed policy under his leadership. He didn’t really move away from his hawkish tones from the last FOMC meeting, there are still some thinking we’ll have a Fed rate rise sometime this year.  Meanwhile in the US, the USMCA, the trade deal between US, Mexico and Canada, looks like it won’t be renewed without further negotiations. 

I had a quick look at a summary of Trump’s financial disclosures.  He made some $1bn or so from crypto business dealings in the last year, a good chunk from a company run by his own sons.  Trump insists he isn’t benefitting from being President and sees no conflict of interest but his earnings for 2025 of $2.2bn eclipse those of 2024.  Trump claims he doesn’t manage his own investments and says everyone else has made money in equities over the last year but it is impossible to think his Presidency has no impact on his ability to make money.  Still, you never see a poor President, indeed you never see a poor Senator. 

In sport, England made it through to the next round of the world cup with a win over Doctor Congo, two late goals from Harry Kane spared England from an embarrassing defeat after Congo took an early lead.  England will now face Mexico in the early hours of Monday morning, to be played in Mexico at their stadium which is some 7,000 feet above sea level.  Plenty is being made of the fact Mexico have lost just two home matches out of 89 played, the most recent being a loss in September 2013.  Despite this, and despite a few underwhelming England performances, we are still favourites to win the match.  It won’t be easy!

US nonfarms is the main event on the calendar today, coming ahead of the US holiday tomorrow.  Headline expected to be just over +100k, down from last month’s +172k, a figure which surprised to the upside and sent USD marching higher.  GBPUSD and EURUSD both lost around 150 pips on last month’s release.  With Fed looking a little more hawkish already I’m thinking that a stronger nonfarm headline this time may have less impact. 

Have a great day, and to our US readers, have a great long weekend…

-  10.00 EU unemployment

-  11.00 ECBs Elderson speaks

-  13.30 US nonfarm payrolls

-  14.30 CAD S&P manufacturing PMI

-  14.45 Feds Daly speaks

-  14.45 ECBs Escriva speaks

-  15.00 BoEs Mann speaks

-  15.00 US factory orders

-  18.55 ECBs Cipollone speaks

-  00.00 AUS S&P services PMI