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

Starmer reported to be close to resigning

Good morning

Well that was a warm weekend, and there is plenty more warm weather on the way with temperatures here forecast to hit 36°c or so through the week before cooling down to a more reasonable 27°c by the weekend.  Best not complain mind you, we’ve had the longest day so our hours of sunshine can only get shorter from here.

In weekend sport other than World Cup action, New Zealand beat England in the second test match with a dominant performance that punished England, who were missing Stokes and Atkinson who has been dropped their drunken antics in a nightclub after the first test.  They will return for the third test that starts on Thursday. In golf, Wyndham Clark held his first round lead to win the US Open despite a final round wobble that threatened to derail his wining chances. 

As well as the weather, things are hotting up in UK politics as well following Burnham’s by-election win last week. The press is full of stories of Starmer’s possible resignation as his support within the party fades.  Some talk of Ed Miliband becoming Chancellor should Burnham become PM could unsettle markets amid waning investor confidence over concerns of growing borrowing.  Still we don’t necessarily need Burnham or Miliband to create uncertainty, news that ONS have admitted an error over jobs numbers which is likely to lead to downward adjustments brings into question the reliability of UK data gathering.

GBP remains reasonably stable having lost a bit of ground against other majors last week.  GBPUSD is hovering around 1.3200, GBPEUR is at one month lows at 1.1525, against AUD, NZD and JPY it is 1.8850, 2.3055 and 213.40.  EURUSD is 1.1445, USDJPY up at 161.75 with Japan FinMin Katayama warning once again that they are ready to act whenever necessary. 

Peace talks between US and Iran are reported to be making progress although there was talk over the weekend that Iran had closed the Strait of Hormuz over Israel’s continued attacks on Hezbollah targets in Southern Lebanon.  Still, equity markets don’t seem overly bothered and oil prices have dipped again after a bit of a spike on the open. 

This week brings global PMIs, Canadian and Aussie CPI, Aussie employment and the main event, the US core PCE number, even though we know it is not one of Warsh’s favourites inflation measures.  Today is a busy one for ECBs Lagarde who appears on the calendar three times.  Aussie PMI’s due overnight.  In the meantime look out for any Starmer resignation talk…

Have a great day…

-  09.00 ECBs Lagarde speaks

-  13.30 CAD CPI

-  14.00 ECBs Lagarde speaks

-  14.00 Feds Waller speaks

-  15.00 EU consumer confidence

-  16.15 ECBs Lagarde speaks

-  00.00 AUS S&P services, manufacturing PMI

USD remains bid after Warsh's first FOMC meeting as Chair

Good morning

Seven BoE members voted to keep rates unchanged yesterday, while two members, Pill and Greene, voted for a rate rise in a move they say would be proactive.  Bailey is happy with policy where it is for now, BoE do insist they are ready to act if appropriate, but the recent peace deal with Iran and the lower oil prices that brings is enough for some to lower their BoE rate forecasts.  HSBC have changed their forecasts from previously two hikes, one each in July and September, to no change at all in 2026.  They even see the next move in rates is likely to be lower although we’ll have to wait until late 2027 according to them.

UK retail sales this morning looked quite upbeat not only surprising to the upside this month but also with upward revisions to last months pretty dismal set of numbers.  Some are putting the higher spending down to a spell of good weather, if that’s the case then June data should be decent as well, it was already scorching hot on my early morning walk with the dog today and its only going to get hotter next week with temperatures forecast to get to the mid 30’s. 

In other UK news, Andy Burnham won a decisive victory in the Makerfield by-election which opens the door for his Labour party leadership challenge.  Burnham made some market-moving comments before he became and MP so it is possible his victory and potential role as PM could spark a bit of volatility.  For now, GBPUSD is down at 1.3200, more a sign of USD strength with EURUSD now 1.1445 but GBP continues to suffer most, the GBP crosses sees the pound trade at 1.1530, 1.8830, 2.3000 and 213.00 against EUR, AUD, NZD and JPY.

USDJPY is currently 161.30, just 50 pips or so off the July 2024 highs which triggered large-scale intervention that took the pair down to below 142.00 in the space of three weeks or so.  We’ve already seen that Japan are willing to intervene again, their action at the end of April confirms this, but it is not clear where their line in the sand will be.  Fighting a strengthening US dollar will be a tough game to play and would surely need coordinated action rather than Japan acting on their own.

In other news, I see that Qantas will be offering non-stop flights from London to Sydney in just over a years time.  The journey will take around 20 hours, that’s a long time on one aeroplane and I’m sure it won’t be for everyone.  Mind you, the specially designed long-distance plane will have areas for wellbeing and exercise, reducing the number of seats available so I’d expect fares to be high. 

TO sport now and England are making hard work of the test match against New Zealand who managed a very respectable 391 all out and have England on the ropes at 222/6.  We’ll need some amazing work from our tail enders if we are going to get close to the Kiwi’s first innings total. 

In golf, the US Open has started.  US PGA winner Aaron Rai has been unable to repeat his performance ending on +4, Justin Rose who recently converted to McLaren irons is only a little better at +3, I wonder if he is ruing that decision.  OK, they look cool, but they need to work!   Wyndham Clark leads the field at -6, McIlroy is -1 and Scheffler is down at +2.  Never write him off mind you. 

Plenty of world cup action over the weekend as well as we move into the second round of group matches.  If I’m honest none of the fixtures are ones I’d drop everything to watch and with the timings of the kick-offs it’s not even as though its something to do if the heat outside becomes unbearable.  New Zealand play in the early hours of Sunday morning, if I read correctly they have not lost a world cup match since 1982.  There’s one for the pub quiz.

Not much on the calendar today but with US/Iran peace deals, possible Labour leadership battles and potential intervention from Japan we can’t take it easy just yet.  Next week brings some decent data with CAD and Aussie CPI, global PMI’s, Aussie employment and the biggest one of the week, the US core PCE numbers, still a major announcement even if Warsh would prefer to move away from this particular indicator.

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

-  11.15 ECBs Cipollone speaks

-  11.30 ECBs Elderson speaks

-  13.30 CAD retail sales

-  15.30 ECBs Lane speaks