GBP starts the week on a stronger footing

Good morning

Welcome to a new week, I hope you enjoyed a tremendous weekend.  We had some excellent weather, I managed to get out in the garden to do some much-needed tidying up including mowing the lawn which is doing its best to turn from brown to green.  I also helped my youngest repair his car.  It had been damaged when parked, a motorbike had hit it a while ago and dented the bumper which absurdly led to it being written off.  Insurance paid out, we bought the car back for very little money.  

We bought a brand new, painted bumper for under £300, took off the old one and put on the new one.  Sorted.  The car will now never be worth anywhere near what it should be but we do have the money to co0mpenste for that.  But this does perhaps highlight why insurance costs are so high.  The insurance firm paid out on the car, and for about six weeks of a hire car while they made their minds up what to do.  All for a repair that really could have cost a few hundred pounds.  Something doesn’t add up.

Main news over the weekend was this thwarted attack at Fairford air base.  Investigations will now take place as to who was behind the plot and what the targets really were.  I’d imagine the vans could have been driven to the hangars of the US B-1 bombers and detonated, damaging those aircraft and putting them out of service, although there could have been a much higher human cost as well.  Regardless it was vigilance from the public that seemed to prevent what could have been a terrible attack although Trump has said the men arrested had been under surveillance for a long time.  I couldn’t imagine they would have allowed these attackers to get so close to Fairford if they had been watched but it does seem plausible that security at the base had been stepped up prior to Sunday.  Not sure we’ll ever know the true story mind you.

So, to the markets and we’ve seen a bit of support in GBP so far with GBPUSD up to 1.3265 from a low close to 1.3200 late last week.  This move does seem to have some amid USD selling against Yen which has seen USDJPY trade down to 156.65 so far this morning after BoJ minutes showed some members wanted faster rate rises to counter rising inflation.  However GBP has also made gains in the crosses as well, now 1.1655 against EUR and 1.8900, 2.3415 and 1.8775 against AUD, NZD and CAD.  GBPJPY is 207.70

We are now exactly one month from the UK budget where it seems tax rises could well feature.  I do wonder whether Starmer and Reeves are kicking themselves for not biting the bullet and adding a penny to income tax rather than trying to pretend they were not taxing ‘working people’.  UK borrowing costs remain at high levels and it is difficult to see Burnham and Healey doing much to turn that any time soon although he has indicated he expects negotiations to continue this week.

Elsewhere, Trump has turned down Iran’s proposal to reopen the Strait of Hormuz,  Oil prices are up around $3 from Friday’s lows when a deal seemed possible with WTI up to around $95 and Brent over $100.  Trump does not seem to be in any mood to back down over Iran.

Today’s calendar is pretty sparse, overnight we will have the latest RBA rate announcement where a 25bps rise to 4.6% is widely expected which I think would make it the highest level since October 2011.  RBA sound determined to counter rising inflation, it will be inte3resting to see whether they give any indication of further rate moves beyond this one although they’d likely want to see the latest CPI data that will be published a day later.

As well as RBA rates and Aussie inflation, this week does have some other heavy-duty releases including UK GDP and EU inflation, but it is US data that is most in the spotlight with core PCE, ISM PMis, and employment numbers including the nonfarms on Friday.

Have a great day…

-  11.00 BoEs Ramsden speaks

-  05.30 RBA rate announcement

-  06.30 RBA press conference