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