A healthy dose of scepticism
Today's news headlines:
'Sunak outlines two-part plan for his premiership'. Prime Minister Rishi Sunak has laid out a two-part vision for his premiership. It can be reduced down to, firstly, reviving the economy and public sector and, secondly, focusing on driving tech and innovation business in the UK. The first part of his plan also has five points: Halve inflation, grow the economy, cut public debt, reduce NHS wait times, and curb illegal immigration. It's unclear how he proposes to fulfil these often diametrically opposed notions, but it sure sounds nice. (Financial Times)
'US inflation has not "turned the corner yet', top IMF official warns'. Deputy Managing Director of the IMF, Gita Gopinath, said it is too early for the Fed to turn the monetary policy boat around and disputed claims that recession is unlikely. This is an interesting contrarian view, given that markets seem to be overwhelmingly positioned for a pullback in Fed tightening. Gita attempts to balance her analysis on labour market indicators and service inflation, which continue to run 'hot'. (Financial Times)
Overnight, comments from Federal Reserve officials warned markets not to underestimate their determination to remain on a hawkish footing. Futures contract position in SOFR (the replacement for LIBOR) suggest markets are betting heavily against that view. Oil price measures are down nearly 8% YTD – that's right, in two business days – which means they are buffeting two-year lows. Natural gas is down 10% YTD and also hugging lows. The Dollar Index continues to trade flat, while EUR is strengthening towards the highs of 2022.
China Caixin Services PMI: 48 vs 46.7 last month
Japan Consumer Confidence: 30.2 vs 28.6 last month
EU German Trade Balance: 10.8B vs 6.9B last month
EU PPI m/m: 10:00AM
EU Italian CPI m/m: 10:00AM
US ADP Non-Farm Employment Change: 1:15PM
US Unemployment Claims: 1:30PM
GBP/USD – 1.2015
GBP/EUR – 1.1320
EUR/USD – 1.0620
USD/CAD – 1.3510
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*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.