Dollar Holds Firm as Markets Eye Fed Inflation Risks
The gas works going on in our road meant we had no heating yesterday. Timing could have been better given it was the coldest day we’ve had. We were finally reconnected around 11pm, just in time for the coldest night which has brought the heaviest frost I can remember for quite some time. I have to say the workmen were good, professional, kept us in the loop and worked extremely hard to get the job done in minus temperatures.
Yesterday was a day of very little in the currency markets, USD held its recent gains but struggled to make further progress. GBP and EUR are now 1.3235 and 1.1065 against USD, while USDJPY traded very briefly above 160, now just a few pips below that level. GBPJPY is 211.70, while in other crosses GBP is 1.9485, 2.3900 and 1.8870 against AUD, NZD and CAD. The US dollar strength has been helped by hawkish comments from various Fed officials who have voiced concerns that inflation risks will need to be handled better by the Fed.
Interest was very much focussed on equities, more specifically on Nvidia whose share price has taken a tumble not only from the recent AI rout but also the news that the CEO, Huang, has had a number of affairs including one with a possible Chinese spy. Huang has now resigned, shares traded to around $150 from a high in early October just above $240 although they did recover a little to $166 into the close. We remain to see who takes over on a permanent basis. Meanwhile Microsoft are having problems of their own with outages reported in several services.
Oil prices have shifted a few dollars higher after Trump said the US don’t need a deal with Iran, a slightly vague comment but one that does raise the prospect of further military action. Oil gains have been limited mind you, but the rise has been blamed on pushing US bond yields higher. Trump has also mentioned that he’d like to take over Cuba before his term ends, saying he’d need a week to do so.
Gold has slipped this week, helped of course by the stronger US dollar. It currently trades at $3,895 having seen a low yesterday around $3,855, its lowest level for over a year. I am still watching XAU/EUR closely, the pair dipped back within a few points of that key EUR 3,475 area again yesterday. Current level is EUR 3,520, I cannot help thinking I’d like to sell otm puts on a dip, for example a one month (15 Dec) put strike EUR100 below spot pays something like EUR50/oz or 150 below spot pays EUR30/oz. That puts the breakeven EUR150 -180 away. This certainly isn’t for everyone mind you, anyone looking at something similar should get in touch first to discuss.
Huang wasn’t the only person to lose his job yesterday. Carrick has now officially left Man Utd and looks set to be replaced by Pochettino. Man Utd have now spent £100m on managers since Alex Ferguson retired in 2013. Actually, in the big scheme of things, that probably isn’t as much as I’d have thought.
In other football, England beat Croatia last night to guarantee a quarter final spot in the Nations League. Sunday sees England take on Spain in what will be a tougher test, England will be hoping to ruin Spain’s 100% win record so far in the tournament.
Let’s hope England’s footballers do better than the cricket team who have been properly demolished by Australia in their ODI this morning. . At one stage England were 65/8 but managed to reach a total of 131 in their innings, Australia took less than 24 overs in reaching the target.
Next week is big for UK data with employment, inflation and retail sales all being released. We’ll have US retail sales and the FOMC minutes, other points of interst will be Canadian inflation, Aussie employment, RBA minutes, NZ trade and RBNZ inflation expectations. Japan’s latest GDP numbers will be released before we get to our desks on Monday morning,
Have a great day, and a great weekend as and when it comes…
- 10.00 EU GDP
- 13.30 US PPI
- 15.50 Feds Bowman speaks
- 17.00 Feds Daly speaks