USD lower after Moody's US downgrade

Good morning

I hope you had a great weekend.  Mine was pretty full and I must admit to having over-indulged on more than one occasion so feeling mildly under the weather this morning.  All self-inflicted so I don’t expect any sympathy of course.

Congratulations to Crystal Palace who beat Man City in the FA Cup final over the weekend.  Fair to say that Man City have a right to feel aggrieved after the Palace keeper somehow avoided a red card that to most people looked like a certainty.  That he then went on to save a penalty just made matters worse for City fans. 

It is only Monday morning but it feels like we’ve already had quite a bit of news.  The US was downgraded by Moodys on Friday, they cited the huge government debt figure of some $37 trillion as a key reason and said that despite the strength of the US economy and financial standing, these are no longer enough to offer full confidence.  Moodys now join Fitch and S&P in having the US below the coveted AAA rating.  Trust in the US is waning.

We’ve seen a weaker US dollar since the open, GBPUSD opened around 1.3270 but has now pushed up to 1.3355, EURUSD opened around 1.1180 and is now 1.1230. 

Plenty of talk of UK looking to seek some sort of deal with the EU which could include defence, fishing rights and visas for young people.  Travellers will be keen to hear that there is some discussions over whether to allow UK passport holder to use EU e-gates.  Some suggestions that this is the UK backing down after the Brexit vote but I’m hopeful there will something good to come from the talks for everyone.  GBP is holding recent gains against EUR, with GBPEUR just a few pips under 1.1900.

Trump is due to be speaking to Putin this afternoon, a day after the biggest Russian drone attack since the invasion started.  I’d love to be a fly on the wall there.  I’m still very doubtful of Putin’s desire for peace but while there are talks I guess anything is possible.  Trump meanwhile is more damning of Fed’s Powell than he is of Putin, saying the Fed should cut rates sooner or later, and that everyone knows it except for Powell. 

Romanian elections over the weekend has seen pro-EU Nicusor Dan take 54% of the vote, defeating the Eurosceptic Simion who had done so well in the first round, sending RON lower.  EURRON had been trading around 4.9750 before the first round election, Simion’s win took the pair up to around 5.1500 or so, now it is back around the 5.03 area. 

Portugal also held elections, the slightly-right Democratic Alliance came out on top but fell short of a majority, meaning more political unrest for Portugal. 

Today sees mostly Fed officials speaking although I’ll be watching for any news coming from Trump’s phone call with Putin.  China rate announcement overnight, no change expected, then we have the RBA rate announcement in the early hours of tomorrow morning, where a cut of 25bps to 3.85 is expected, with a very outside chance of a 50bps cut.    

In addition to the rate announcements, the week ahead brings UK inflation and retail sales data, inflation from Canada and Japan and EU, UK and US PMI’s,  Some other major events this week include the Europa League final between Spurs and Man Utd, and the release of the latest Mission Impossible film.   Plenty to look forward to!

Have a great day…

-  10.00 EU HICP

-  13.30 Feds Bostic speaks

-  13.45 Feds Jefferson, Williams speak

-  14.00 Trump/Putin speak

-  18.15 Feds Logan speaks

-  18.30 Feds Kashkari speaks

-  02.15 PBoC rate announcement

-  05.30 RBA rate announcement

-  06.30 RBA press conference