US/Iran ceasefire comes to an end

Good morning

Welcome back after a slightly milder weekend.  I hope you had a good and peaceful one, even if that peace was interrupted briefly by the government text alarm system reminding us not to light barbeques in these dry times.  I watched the Community Shield match between Arsenal and Man City yesterday afternoon, have to say Arsenal looked pretty decent even though they probably weren’t playing their strongest team.  Likely to be the team to beat this season and it’s not a surprise that their odds of retaining their league title sit just over evens.  The new Premier League football season begins this week and I think it promises to be competitive and enjoyable, with some new rules to hopefully reduce some of the annoying bits of the game such as time wasting and grappling at corners.  I’m looking forward to it, just hoping Spurs improve on their last two Pl seasons.

On Friday both US retail sales and the Michigan sentiment survey disappointed which gave the market even more reason to play down the chances of a Fed rate rise next month.  The US dollar weakened, GBP and EUR traded up to 1.3560 and 1.1585 and although both closed lower by the end of the week, this morning we have seen renewed USD weakness that has taken GBPUSD back up to 1.3560 and EURUSD to 1.1600.

USDJPY is off its recent highs, now 158.90, Yen a touch stronger despite a pretty shoddy Japan GDP reading that surprised overnight.  Some suggestions are that this number is likely to be revised higher so it may not affect BoJ rate rise thinking.

The formal US/Iran ceasefire ends today which is raising Middle East tensions.  Iran have said they will not resume talks with Washington, the US are looking at economic sanctions to hit Iran with, given the military strikes ultimately failed to force Iran to give in to US demands.  I thought Iran were already under pretty strict sanctions so quite what the US can put in place now remains to be seen.  Trump insists the US have complete control the Strait of Hormuz although reports over the weekend suggest ships in the area have been attacked.  Meanwhile Trump has said he’ll reduce military activity with South Korea as a punishment for not helping the US more in the Iran war, although I also wonder whether it has anything to do with Trump trying to extend an olive branch to North Korea.  Either that or the US really are running low on ammunition and don’t want to be wasting it.

Canadian inflation numbers are probably the main event today, expected to tick higher than last month’s readings which had surprised to the downside.  Trade talks between US and Canada continue this week, ahead of the deadline on 19^th August which sees US tariffs coming into effect.  It isn’t clear whether the talks will conclude with an agreement, the US have already warned Canada that is has to remove an retaliatory tariffs it has or will put into place, otherwise US will introduce additional tariffs.  USDCAD is 1.3855, its lowest level since early June and well below the June highs of 1.4250, perhaps highlighting the weaker US dollar rather than specific CAD strength.  GBPCAD is 1.8790 with 1.8710 a key downside level to watch.

I’m out of the office early tomorrow and won’t be back until late Wednesday.  No holiday this time, I’m visiting clients which as many of you will know is one of my favourite parts of the job, certainly never a chore.  I’ve added in calendars for the next couple of days.  UK employment data is out early tomorrow morning and UK inflation is Wednesday morning.  FOMC minutes on Wednesday evening could bring greater attention given Warsh’s reduced communications, and although I’m back in the office Thursday we’ll have Aussie employment numbers before I get to my desk.   

Have a great day…

-  10.30 ECBs Lane speaks

-  13.30 US empire state manufacturing survey

-  13.30 CAD CPI

Tuesday

-  01.30 AUS consumer confidence

-  07.00 UK employment

-  10.00 German ZEW

-  12.45 ECBs Lane speaks

-  13.15 US ADP 2 week average

-  13.30 US housing starts

-  14.15 US industrial production

-  15.00 US pending home sales

-  23.45 NZ PPIWednesday

-  02.30 AUD wage price index

-  07.00 UK CPI, PPI RPI

-  08.10 ECBs Lagarde speaks

-  10.00 EU HICP

-  19.00 FOMC minutes

Thursday

-  00.50 Japan trade

-  02.30 AUS employment

-  07.00 German PPI