Hawkish central bank comments seems to be the order of the day

Good morning

First day back and dusted, avoided any air traffic control issues by a day on the way out and again by a day on the way home.

It wasn’t a particularly busy day, GBPUSD and EURUSD were stuck in tight ranges, the latter eyeing support around 1.1455 which is just a few pips off where we are now, GBPUSD is 1.3365, 30 pips or so off last weeks lows.  GBPEUR is around 1.1660.  Of interest have been comments from Fed’s Musalem and Collins who have said they’d be open to raising rates further to combat inflation. 

Meanwhile is has been reported that UK government borrowing in August was higher than forecast and is expected to continue at higher levels which will make it difficult for UK’s Chancellor Healey in the UK budget later next month.  With UK and Europe struggling fiscally and politically and the US economy still firm with more rates rises possible I wouldn’t be surprised to see lower GBPUSD and EURUSD today.

In the commodity currencies, AUD, NZD and CAD now 1.8795, 2.3305 and 1.8750 respectively against GBP.  NZD has gained following comments from RBNZs Breman who suggested RBNZs inflation forecast could be revised higher in October, adding that she does think the NZ economic recovery, although uneven, will strengthen and broaden.  AUDNZD is down to 1.2400 despite several banks talking up the chances of another RBA rate rise at their meeting next week.   

Plenty of central bank officials on the calendar today, I would not be surprised to hear ECB members as well as Fed officials talk up the chances of another rate rise should inflation remain high.  UK PM Burnham is meeting Trump today, not sur I can see the two of them really hitting it off but I reckon the timing of Burnham’s announcement that UK will offer military support to Saudi Arabia is no coincidence and could gain favour from Trump, although given only one British aircraft could be involved it perhaps isn’t quite as helpful as the headline suggests.  The lack of clear US support for Saudi Arabia during attacks from Houthis remains a bit of a mystery.

Trump will also meet with Zelensky today, it is reported Trump has asked him to stop attacking Russian oil refineries over concerns of fuel shortages and higher diesel prices.  Quite why Ukraine would listen to Trump’s pleas isn’t clear unless some sort of support is offered, or unless Trump can persuade Putin to back down, both of which seem unlikely.  Trump meets China’s Xi later this week.

Equity markets have been in the headlines following sharp gains in the US following reports of success from Meta’s new AI model which saw Nasdaq close over 2% higher although that optimism hasn’t followed through in Asia overnight or Europe this morning where markets are more mixed.

Have a great day…

-  09.30 ECBs Nagel speaks

-  13.00 ECBs Lagarde speaks

-  15.00 US consumer confidence

-  15.05 Feds Williams speaks

-  15.20 Feds Jefferson speaks

-  15.25 ECBs Sleijpen speaks

-  18.00 Feds Barkin speaks

-  20.30 ECBs Nagel speaks

-  00.00 AUS S&P services, manufacturing PMIs