USDJPY higher but no sign of intervention

Good morning

My eldest has returned from the US having been there for the first three England world cup matches, combined with a road trip covering some 2,500 miles.  All in all, he had a good time but spent more than anticipated, quite surprised at the price of things out there.  Still, the four of them that went will have made some memories, that’s for sure.  So, now everyone is back from holidays, in the space of one week the Evans household has gone from being just me and my wife to now being four of us plus three guests from New Zealand.  I do like a busy house although with all the comings and goings this morning I’m a little behind schedule.

We had a spell of USD weakness yesterday afternoon that took GBPUSD to 1.3275 and EURUSD to 1.1435, however that didn’t last too long and as I type this morning EURUS is just on 1.1400 and GBPUSD back to 1.3240.  These 30 or so pip moves are something I’d never have written about but we’ve had such tight ranges sometimes that such moves now seem a reasonably big even, when in reality its not really significant. 

GBP has held up well despite comments from BoEs Bailey who said that pre-Iran war pricing of two BoE rate cuts this year was not unreasonable and while he’s not happy inflation saw an uptick on higher energy prices, he noted that oil prices are now back to almost pre-war levels and he sees inflation slowly returning to the 2% target.  GBPEUR is 1.1615, ECB officials are saying there will be no need to raise rates again if energy prices can stay stable.  Against AUD and NZD, GBP is currently 1.9210 and 2.3325.

Yen has continued to weaken, USDJPY hit 162.85, not 20 pips off those highs but we’ve heard very little from Japanese officials, perhaps they understand that the market expects their usual ‘we are watching’ comments and as such verbal intervention means less and less.   Markets remain nervous though, I still wonder whether we’ll see some action later in the week in the reduced liquidity of the US holiday, but there is some suggestion that we won’t see anything until 165 now. 

Central bank speakers feature highly on the calendar today, particularly this afternoon when we’ll have Warsh, Lagarde, Bailey and Macklem all on a panel at the ECB forum in Sintra, Portugal. This is Warsh’s first outing since his debut as Fed chair a couple of weeks ago, it will be interesting to see if he’s pushed for some sort of forward guidance given he is looking to limit any such talk, seeing it as unhelpful.  US ADP jobs data and ISM manufacturing PMIs are also on todays calendar but the highlight of the week will be tomorrows nonfarm payroll, released a day early due to the US holiday on Friday.

England play their first world cup knockout match later today against DR Congo.  When my youngest was much younger he once saw that on map and called it ‘Doctor Congo’, something that has stuck in the Evans household ever since.  It’s a pleasant 5pm kick off so do try to avoid complicated pricing requests late in the afternoon, but if you do need something Mark will certainly be the man to talk to!

Have a great day…

-  09.45 ECBs Cipollone speaks

-  10.00 EU HICP

-  11.15 ECBs L:ane speaks

-  13.15 US ADP employment

-  14.00 Feds Warsh speaks

-  14.00 ECBs Lagarde speaks

-  14.00 BoCs Macklem speaks

-  14.00 BoCs Bailey speaks

-  15.00 ECBs Lagarde speaks

-  15.00 US ISM manufacturing PMI

-  23.45 NZ building permits

-  02.30 AUS trade

Burnham outlines his plans for the UK

Good morning

Well here we are, the end of Q2 and the end of H1.  Seems to have gone absurdly quickly, half way through the year already.  Time flies when you’re having fun, I guess!

I listened to Burnham speak yesterday.  Overall I cannot say I was impressed.  I thought he was quite divisive, happily separating London from the rest of the country.  Now, I am closer to London so maybe I am biased or simply not aware of the huge unfairness that other areas have to face, but the idea of moving the PM’s office to number 10 North suggests his aims are more to do with teaching London a lesson than any serious political initiative.

For GBP, while there may be some sort of short term support led by hope and optimism that this time it’ll all be different, the Burnham bounce as some have called it, at some point it’ll be about whether markets believe Burnham’s approach is credible and will work without putting any further stress on UK’s already stretched finances.  For a start, the idea of putting local councils in charge of more money fills me with dread.  I remain sceptical.   

GBPUSD did trade to a high of 1.3260 yesterday evening but I’m not sure this can be attributed to Burnham given EURUSD also pushed higher around the same time, reaching 1.1430 although this morning GBP is up a little against EUR at 1.1610.  The EU are reported to be setting up trade talks with China aimed at reducing the widening trade deficit.  GBP is at 1.9250, 2.3415 and 214.75 against AUD, NZD and JPY respectively, the latter pushing higher as USDJPY finally breaks above 162.00, now 162.20 having seen a high around 162.40 earlier this morning. 

Japan’s FinMin Katayama has once again given it a bit of the old ‘we are ready to act’ speech but for now her comments have fallen on deaf ears. There remains a feeling that Japan will intervene again at some point but this would really only slow the pace of Yen depreciation rather than turn the trend.  I still wonder whether Japan could take advantage of the reduced liquidity over the US holiday later in the week, early hours of Friday morning perhaps, but it does seem as though Yen weakness is here to stay and 150’s/160’s will become the norm rather than the 130’s/140’s.

In sport, both Germany and the Netherlands have been sent packing from the world cup, both beaten on penalties.  Germany were perhaps unlucky to have had a late goal ruled out for a foul on the keeper after VAR disallowed it.  This evening we’ll have Ivory Coast v Norway and France v Sweden.  Norway and France are favourites to win their respective matches, I wonder whether we’ll see any upsets this evening?

Today’s calendar has plenty of central bank speakers at ECBs forum in Sintra.  US JOLTs data is the first of the week’s US jobs data although unlikely to have a major market impact. 

Have a great day…

-  09.40 ECBs Elderson speaks

-  11.40 ECBs Schnabel speaks

-  11.40 BoEs Breeden speaks

-  13.00 German HICP

-  13.00 ECBs Cipollone speaks

-  13.30 CAD GDP

-  14.00 US house price index

-  14.30 ECBs Lane speaks

-  14.45 US chicago PMI

-  15.00 US JOLTS, consumer confidence

-  00.50 Japan tankan survey

-  02.30 AUS building permits

US/Iran trade shots but markets remain stable

Good morning

I hope you enjoyed the tail end of last week and the weekend, it has got a little cooler here but it looks like temperatures will be on the rise again as we head towards the weekend and by this time next week we’ll be back up above 30°c. 

England have got through to the next round of the world cup by beating Panama 2-0, next up is DR Congo on Wednesday at a very reasonable 5pm kick off.  England’s cricketers look on the verge of defeat once again, still needing 270 runs with just six wickets remaining after a dismal evening session yesterday that saw four wickets fall for just 45 runs.  Ben Stokes announced his retirement from test cricket midway through the match which was rather unusual, then put himself into bat as an opener before losing his wicket after half an hour or so.  Can’t work out of it was tactics or just ‘this is my last one, I’m going to make it all about me’.

In F1, George Russel won the Austrian GP to take him into second place in the drivers championship, stil behind his team mate Antonelli who came in third.  Next up is the British Grand Prix at Silverstone this coming weekend. 

In other news, thought I’d mention that Amazon’s Prime Day drummed up some $26.5 billion in sales.  Hardly any of which came from the Evans household, which is a rare treat for me.

Main headlines over the weekend were about US and Iran trading shots, putting the ceasefire and peace talks at risk.  Strangely, markets don’t seem too disturbed Oil prices opened a touch higher but are pretty much back to where they started, Asian equities are looking mostly positive and futures pricing suggest European markets could open slightly higher this morning.  Both sides have agreed to put a stop to hostilities but this does go to show how fragile this ceasefire really is.

In terms of currencies, the majors haven’t seen a great deal of movement with GBPUSD and EURUSD now 1.3220 and 1.1405, putting GBPEUR at 1.1590, once again that foray above 1.1600 didn’t last long.  Still,, it is almost certain that the moment I say ‘it’s a no brainer, let’s sell 1.1600 calls’ the pair will jump to the 1.20’s.  Against AUD, NZD and JPY, GBP sits at 1.9155, 2.3375 and 214.00, with USDJPY still in the high 161’s.  

Some talk out of Russia that Putin has admitted Russia are facing some problems in the invasion of Ukraine, as Ukrainian drone strikes start to affect Russia’s energy infrastructure.  Bloomberg reports that peace talks could restart once US become less involved in Iran. 

Here in the UK it seems we could face our own issues as Andy Burnham looks set to replace Starmer as leader of the Labour Party and as such become PM.  Plenty of ‘tax the rich’ talk, I’ve even seen a reference to ‘taxing middle class southerners’.  He will speak later today, unveiling his plans for the UK which include giving regional mayors and councils more control over spending as he looks to move power away from Whitehall.  That sounds like potential for disaster.  It looks like Rachel Reeves is counting down the end of her days as Chancellor but it is not yet clear who will replace her, Ed Miliband seems to be a front runner.

It’s a short week this week, well at least for the US as they have Friday off to celebrate 4^th July, although this usually means the markets die a death late on Thursday.  Before then we’ll have UK GDP, EU inflation, Aussie trade and US ISM manufacturing PMIs and the usual raft of US employment data through the week, culminating in the nonfarms which are out Thursday, a day early due to the US holidays.  Plenty of central bank official speaking as well including BoEs Bailey, ECBs Lagarde and Fed’s Warsh on Wednesday. 

Have a great day...

-  10.00 EU consumer confidence

-  18.30 ECBs Lagarde speaks

-  00.30 Japan unemployment

-  02.30 RBA minutes