Waiting for Warsh

Good morning

Well it was another pretty non-eventful day yesterday, USD tried to push a tiny bit higher against GBP and EUR but by the London close we were back to pretty much where we started the day.  There seems to be an increasing chance of a Fed rate rise next month although it seems more likely this a ‘one and done’ move so the ultimate impact on the US dollar may not be too significant.  Oil prices did tick a bit higher with WTI and Brent up to $83 and $88.00 although there are reports that oil is being shipped through SoH at an increasing rate, around half of pre-war levels.

Major currencies are once again broadly unchanged with GBP and EUR now 1.3585 and 1.1645 against USD, putting GBPEUR 1.1665.  GBP looks like it will end the week lower in the crosses, currently at 216.65, 1.8880, 2.2805 and 1.8820 against JPY, AUD, NZD and CAD. 

We will hear from Feds Warsh at Jackson Hole this afternoon, so far we’ve had little in the way of news from there but attention will be on Warsh given he prefers to keep his cards close to his chest.  We know Warsh would love to see rates lower but he’s joined the Fed at just the wrong time, just a month or so before the US attacked Iran which sent oil prices, and inflation, higher.  The Fed are in a very difficult spot, with an economy that looks pretty strong, inflation above target, but a worrying employment market. 

There has been plenty of talk recently of a Fed rate rise next month but  it is possible Warsh still tries to give a dovish outlook, perhaps he’ll say something along the lines of ‘need to see more incoming data before making a decision’.  It is also possible Warsh avoids any form of policy commentary.

Next week we have rate announcements from RBNZ and BoC, EU inflation numbers, Aussie trade balance and US ISM manufacturing.  We also have the various US employment releases through the week, concluding with the nonfarm payrolls on Friday.  The fear of a softer labour market is a key factor that has so far prevented Fed from raising rates.  If we see a positive headline next week I’d imagine bets on a US rate rise will increase, but if the headline or unemployment rate are considerably worse than expected it is possible the market will wonder if the Fed can hold out for another month or two.

We did get some cricket between England Pakistan yesterday, the conditions weren’t great for batting and England, having been made to bat first by Pakistan, managed 248/9 which doesn’t sound tremendous but actually isn’t so bad given they were 36/3 at one stage.  The match continues today, weather permitting.  Meanwhile rugby fans will have the second South Africa v New Zealand match to enjoy on Saturday afternoon, the Springboks desperate for revenge after their defeat by the All Blacks last weekend.  Expect a pretty bruising encounter.

Onto football with premier league action this evening with Crystal Palace hosting Man City who will be without both Savinho and Marmoush as Spurs have signed them both.  Just a few days to go now until the end of the transfer window and I think several teams will still make some pretty big signings. Spurs, this seasons big spenders, welcome Newcastle on Saturday.  I had Newcastle down as one of the teams who will struggle this season but in fact they were unlucky not to come away with three points in their opening match against Liverpool.  Chelsea v Brighton could be a great match on Sunday, one to watch if my gardening gets halted for bad weather, and I’ll be very interested to see if Man Utd get turned over by Ipswich, another newly promoted side, after Man Utd’s defeat to Hull in the opening match. 

It is a UK bank holiday on Monday so there will be no report hitting your inboxes until Tuesday which rather incredibly will be September!  This is the last bank holiday until Christmas Day!  Crikey, with rain, the evenings getting darker, and no bank holidays, it would be easy to be full of doom and gloom.  However we must remember life is not at all bad compared to some situations.  Just take a look at the incredible but distressing footage of horrendous flash floods that hit Nepal and Tibet which we know has killed nearly 500 people, a toll that is likely to rise given the number of missing people. 

The speed and power of the flood serves as a reminder of just how quickly and suddenly life can change.   I don’t like to end the week on a sad note so instead let’s just think over the long weekend of being better people, make someone else laugh or tell someone how special they are to you.  You just never know whether you’ll get another chance.

Have a great day and a great weekend as and when it comes.

-  10.00 EU consumer confidence

-  13.30 CAD GDP

-  14.45 US Chicago PMI

-  15.00 Feds Warsh speaks

-  15.00 US Michigan sentiment

-  16.55 ECBs Schnabel speaks