Main Headlines
GBPUSD seems to be at a key turning point after easing off the highs that we saw on Monday. Failure to breach the 3rd October highs suggests that the bounce off the low seen on the 26th September may not continue. A breach below the rising trendline of support, and we could well see last week’s low tested on the GBPUSD pair. Otherwise a bounce off here and we could see a test of that 3rd October high.
Markets
GBP
Just when it felt eerily quiet on the political noise, yesterday it was announced that Foreign Secretary Suella Braverman has parted ways with the government, to be replaced by Grant Schapps. In her resignation letter she questioned the direction of the government, with the letter almost a call for the PM to resign as well.
Grant Schapps was a backer of Rishi Sunak during the leadership contest, as well as being loud in his calls for the PM to ditch the top rate of income tax. He was also fired by Liz Truss from his role as transport secretary, and only recently voiced his concerns about the PM.
Two further resignations were reported last night as a vote on fracking got very heated, before the PM managed to convince chief and deputy whip Morton and Whittaker to remain in their posts.
Last night cabinet ministers held private conversations on whether Liz Truss should quit. It seems that we could be in the final phase of the PM’s tenure.
Market action saw sterling recover from that higher inflation print in the morning, but sold off going into the close of European trade, and early this morning we are seeing sterling marginally higher. Charts suggest that we are at a key support level for GBPUSD to indicate if the rebound from 26th September will continue.
EUR
Inflation in the EU ramped up to 9.9% in September from 9.1% in August. Markets are still pricing in a 0.75% rate hike.
Gas prices in Europe spiked yesterday, putting some selling pressure on the euro after some African suppliers of LNG to Europe reported supply would be halted due to floods.
European leaders will be meeting today in Brussels to discuss energy. Up to now, leaders have been unable to find common ground on how they can impose a cap on gas prices, so we look to see if there can be any consensus from today’s meetings, and if whether this could give the euro any support.
USD
The dollar gained across the board yesterday as markets took a risk-off mood.
Housing data disappointed yesterday, with mortgage applications falling for the fourth consecutive week by 4.5%. Purchases were down 3.7%, and the average 30-year mortgage is now 6.94% from 6.1% last week. However, the data did little to dent the dollar.
Fed’s Bullard commented last night that he sees the Fed ending ‘front loading’ of aggressive rate hikes early next year, with a shift to more gradual rate hikes. This expectation is already largely priced in by markets, with data suggesting two more 0.75% hikes in November and December, with smaller hikes seen in February and March.
Housing sales data out today but it doesn’t seem that this will be market moving. We continue to keep an eye on USDJPY as it approaches the 150 mark, and if whether any currency intervention could cause broader USD selling.
Equals Morning Report- 20th October 2022
Market Rates
Today’s Interbank Rates at 10:15 am against sterling movement.
GBP>EUR – 1.1425
GBP>USD – 1.1184
EUR>USD – 0.9777
GBP>CAD – 1.5379
GBP>AUD – 1.7784
GBP>SEK – 12.524
GBP>AED – 4.1040
GBP>HKD – 8.7740
GBP>ZAR – 20.445
GBP>CHF – 1.1227
Today’s Calendar
· USD Initial Jobless Claims(Oct 14)
· USD Initial Jobless Claims 4-week average(Oct 14)
· USD Philadelphia Fed Manufacturing Survey(Oct)
· USD Fed’s Jefferson speech
· USD Fed’s Cook speech
· USD Monthly Budget Statement(Sep)
· USD Fed’s Bowman speech
· NZD Exports(Sep)
· NZD Imports(Sep)
· NZD Trade Balance NZD (YoY)(Sep)
· JPY National Consumer Price Index (YoY)(Sep)
· JPY National CPI ex Food, Energy (YoY)(Sep)
· JPY National CPI ex-Fresh Food (YoY)(Sep)
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