All quiet, USD remains firm, oil lower

Good morning

We had a bit more USD strength yesterday although GBP and EUR are now back to pretty much where they were this time yesterday morning, 1.3180 and 1.1360, with GBPEUR just above 1.1600.  AUD had a brief push higher on better employment numbers overnight but downward revisions to previous months data saw AUD revert to pre-release levels, 1.9120 against GBP and 0.6890 and 1.2220 against USD and NZD respectively.  USDJPY remains in the high 161’s despite more jawboning from Japan officials.  Equities are a little mixed but oil prices fell through the day, WTI just a touch under $70 now with Brent $73.25, bringing them even closer to pre-war levels.

Otherwise, there is not a huge amount to report.  Chinese firms have been accused of stealing US AI technology, not exactly a huge surprise from the country that will replicate anything and everything.  Andy Burnham is in the papers as he will be for some time having given a brief insight into his ideas for a future Britain, we’re still expecting him to make a broader speech next week.

US core PCE is the main event on the calendar today although as I have said already this week we know that although it was one of the Fed’s key inflation indicators, incoming Fed chair Warsh prefers other measures so over time the impact this release has may become more muted.  For now, it remains a potential market mover, perhaps more so if it surprises to the downside this time.  US GDP also on the calendar but this is the third release of Q1 data so shouldn’t have a major impact. 

I’m out of the office for the next couple of days so I’ve added in Friday’s calendar as well, US michigan sentiment the main event tomorrow but worth noting any policy thoughts from the various central bank officials who are speaking over the next couple of days.  If Warsh has his way and reduces forward guidance, comments from Fed officials could be watched a lot closer in the coming months.

In other news, Scotland are almost out of the world cup after losing to Brazil yesterday which leaves them third in their group, just an outside chance that they make the knockout stages.  England will be playing Saturday evening in the final match of their group, looking for a much needed win after the draw against Ghana.  We are as good as through, it is really just a case of who tops the group.  Money has to be on England to beat Panama, surely?

In cricket, the third test match between England and New Zealand begins today with England hoping to produce a far better performance than we saw last week during their defeat in the second test.  It will be a hot day in the field today and tomorrow but I see there is some rain forecast for the weekend which could disturb play.  Let’s call it a draw then, shall we?  Good odds on that at 7-1.

Of course a lot of talk here is about the exceptionally high temperatures and although I can’t say I agree with school closures and the like I think it is worth noting the difference between temperatures around 27°c and 35°c.  They don’t sound so different, both a very warm.  But anyone who has experienced this level of heat in the last day or so will attest to the fact that there is a significant difference.  The humidity doesn’t help, but regardless it has been very hot indeed.

I’m heading to the south coast today for a small family get together, temperatures there in the high 20’s rather than mid-30’s which will be a bit of a relief, I’m assuming the hotel will have air conditioning as well which should mean a better nights sleep. 

So, no report tomorrow, I’m back on Monday.  Next week’s calendar brings UK GDP and EU inflation, as well as a host of US employment data including the all-important nonfarm payrolls.  They will be released a day early on Thursday due to Friday being a US holiday for independence day.  I wonder what film we’ll be watching over the weekend?

I have a good friend and his family arriving here from New Zealand to stay for a month or so on Monday.  I’m very much looking forward to that although I have to say that when we get together it is rarely a particularly healthy event, but very good fun.  He’s a regular reader of this report so he’ll know exactly who I mean.  Looking forward to seeing you mate.

Have a great day, and a great weekend as and when it comes…

-  09.00 ECB economic bulletin

-  11.00 ECBs Lane speaks

-  13.00 ECBs Cipollone speaks

-  13.30 US core PCE, GDP, durable goods, initial claims

-  16.00 ECBs Cipollone speaks

-  20.40 Feds Williams speaks

-  23.30 Feds Goolsbee speaks

Friday

-  00.30 Japan Tokyo CPI

-  09.30 ECBs Nagel speaks

-  15.00 US Michigan sentiment

-  15.30 Feds Williams speaks

-  16.30 Feds Kashkari speaks

-  17.00 ECBs Vujcic speaks

RBA rate rise forecasts pushed back after softer inflation numbers

Good morning

I was out walking the dog this morning.  I’d set off a little earlier than usual to avoid the heat, obviously more for the dog’s sake than mine.  When I left the house it was the sort of temperature in which you’d be happy sitting outdoors.  By the time I got back it was already getting uncomfortable.  The heatwave has been well publicised, we’re getting to the mid 30’s today.  If we take say 27°c as a great, warm but no overbearing temperature, 35°c is 30% warmer.

Les hot was England’s performance against Ghana yesterday evening.  It wasn’t that it was bad, and all credit to Ghana who played their game nigh on perfectly.  But it highlighted my issue with England that while we have a team of very decent players, we lack anyone that stands out above the rest, someone capable of creating a spark of excellence.  I’m think Gascoigne, that sort of flair player.  Still England are not the first of the big teams to fail to win.  Brazil, Portugal, Belgium and Spain have all drawn group matches so we’re not in bad company.  England got lucky with a couple of decisions including what looked to me like a pretty good case for Ghanian penalty.  But we’ll take the point and look forward to Panama at the weekend.

To currencies, and the US dollar has had a bit of a push higher with GBPUSD currently 1.3195 and EURUSD at its lowest levels since June 2025 at 1.1355.  This EUR weakness took GBPEUR up through 1.165, now 1.1615, very close to highs not seen since July 2025. 

Aussie CPI inflation headline was softer than expected overnight, although the trimmed mean was just above forecast.  Trimmed mean is what Fed’s Warsh has talked about but I’d imagine he’d only prefer that measure if it put inflation lower.  The lower Aussie reading which followed a surprise to the downside in the same reading last month, has led some banks to push back their forecast for an RBA rate rise until much later in the year.  AUD has lost ground to the US dollar, now 0.6900, the lowest its been since early April.  GBPAUD is at recent highs around 1.9115 but AUD is looking strong against a struggling NZD< with AUDNZD hitting the mid-1.22’s having been below 1.20 just a month or so ago.  GBPNZD now 2.3340, almost 10 big figures above the June lows. 

Meanwhile, US/Iran peace talks continue with Iran, it still isn’t really clear what’s going on there.  Trump insists Iran have agreed to various nuclear inspections although Iran haven’t confirmed that at all.  Still, with UAE oil exports running at some 85% of pre-war levels, it is no surprise that oil prices are continuing to fall, now less than $5 from pre-war levels. On the subject of war, Russia are pressuring Belarus to open a new front in Ukraine.  This follows news that Russia have started to gain strategic footholds in the Donbas region.  Putin is perhaps looking to pile pressure on Ukraine who will likely need EU, and hopefully US support, to keep the Russians from making too much headway. 

Several central bank speakers on the calendar today including BoEs Dhingra later in the London session.  She has previously been regarded as dovish and it could be interesting to see whether she has really turned neutral, as per her voting at the last BoE rate meeting, or whether she still has concerns about the economy and sees rate cuts as necessary despite recent energy-led inflation.

Aussie employment numbers overnight, last month they surprised to the downside, coinciding with two months of lower than expected Aussie CPI numbers.  A softer reading overnight will really put RBA on the back foot when it comes to rate rises and further AUD losses could well be seen, although perhaps that won’t be reflected in AUDNZD. 

Have a great day…

-  09.00 German IFO

-  10.00 ECBs Nagel speaks

-  12.20 BoEs Breeden speaks

-  14.00 SNB quarterly bulletin

-  14.35 ECBs Cipollone speaks

-  15.00 US new home sales

-  16.00 BoEs Dhingra speaks

-  02.30 AUS employment

What a storm!

Good morning

Well that was the mother of all thunderstorms.  We awoke last night to lightning, thunder and heavy rain.  Not the first time, and we were expecting the storm to drift away after a few minutes as storms usually do.  Instead it felt as though the storm was trapped above us.  The storm continued relentlessly for over two hours, I’ve certainly not experienced anything like that in the country, lightning so bright and continuous, thunder so loud.  Dropped off to sleep around 4am so I’m feeling a little more tired this morning than usual.  Fortunately we didn’t get the flash flooding that many experienced, and my internet is still working.  The last big storm we had knocked my internet out for a week.

A storm had hit the UK political scene on Monday with Starmer resigning in an emotional speech during which he talked about lots of good things he’d done but not mentioned any of the numerous u-turns he’d had to make during his time as PM, either as a result of an idea being awful, resented by the public or resented by his own party.  Still, better the devil you know.  Goodness knows what Mr Burnham will be like, should he win the leadership contest.  The Times reports Burnham will speak on the economy early next week. 

GBP actually rallied after Starmers announcement, perhaps a sign that of all things, the markets dislike uncertainty the most.  GBPUSD moved up from 1.3185 or so to an afternoon high around 1.3270, while GBPEUR traded from the 1.1520 area up to around 1.1600, remember that is an area that has held for the best part of a year now.   GBPUSD is off those highs, now 1.3230 but GBPEUR has held in the high 1.15’s.  In the crosses GBP has moved to 1.9030, 2.3260 and 213.75 against AUD, NZD and JPY respectively.  Must admit, if I left my job and the markets rallied I’d feel pretty glum.  

So GBPUSD sits around 1.3230 as I type, EURUSD is 1.1415 and equities are deeply in the red.  This feels more like a return to reality after the optimism over the end to the US/Iran war.  Even if oil starts flowing freely all is not so great in the world and deep risks remain.  In Japan, FinMin Katayama said she had been in talks with US TsySec Bessent yesterday and the US and Japan have reiterated their cooperation and agreement.  USDJPY did drop from 161.90 to 161.10 on news of that meeting broke yesterday afternoon but soon returned to the mid-161’s where we sit now.  Verbal intervention isn’t pushing UDSJPY lower but it may be slowing yen depreciation.

In other news, I see Alan Greenspan has passed away, he got the ripe old age of 100, quite a feat.  News of another death also reached me yesterday, an old client that I worked with from the 1990’s until just recently also passed away.  I won’t name him here, client confidentiality and all that, but I don’t think I’ll ever meet a gentleman so intelligent and talented, and with such a varied and dare I say, wild, life. 

Despite the storms overnight, temperatures are set to hit highs around 35°c or more here over the next few days, with high humidity making It feel even hotter.  I have heard that some schools will close as weather warnings go from amber to red.  I know not everyone is getting it like this, I see the south coast will be some 10°c lower in temperature which suits as I am heading that way Thursday and Friday.  

EU, UK and US PMIs today, and plenty of central bank officials on the calendar as well.  Still, dare I say that that the main event today could well be Amazon’s Prime Day which promises to bring huge savings on plenty of products we didn’t know we needed. 

This evening sees England back in world cup action, this time taking on Ghana.  Let’s hope that takes place without the weather delays France witnessed in their match against Iraq yesterday.  Heavy rain and thunderstorms meant the second half started almnost two hours late.  If that happens this evening I’m not sure I’ll be able to stay awake after last nights storms!

Have a great day…

-  09.00 EU services, manufacturing PMIs

-  09.00 ECBs Escriva speaks

-  09.30 UK S&P services, manufacturing PMIs

-  09.30 ECBs Lane speaks

-  13.15 US ADP 4 week average

-  14.00 BoCs Macklem speaks

-  14.15 ECBs Elderson speaks

-  14.45 US S&P services, manufacturing PMIs

-  14.55 ECBs Vujcic speaks

-  14.55 BoEs Taylor speaks

-  18.30 BoEs Dhingra speaks

-  02.30 AUS CPI