High Low High Low
EUR/USD 1.1154 1.1062 USD/ZAR 11.9744 11.8910
GBP/USD 1.5525 1.5472 GBP/ZAR 18.55 18.43
EUR/GBP 0.7191 0.7145 USD/RUB 49.99 49.30
USD/JPY 121.11 120.58 USD/NGN 199.5 199.0
GBP/CHF 1.4563 1.4512 S&P 500 2,130 2,124
USD/ILS 3.8983 3.8524 Oil (Brent) 65.08 64.12


Don’t look now, but the Nikkei, the Japanese stock index has made new year to date, and indeed, 15 year highs. The Nikkei has been surging for over a year now with Abenomics the primary cause, but there was some cheer today as economic growth numbers were published with a positive surprise. The Japanese economy grew at an annualised 2.4% pace in Q1 2015, but looking at the details, it’s probably not such a good thing, as the growth was largely attributable to an inventory build up. Nevertheless the Nikkei finds itself just 2 – 3% away from the dotcom era high and that would be a significant level to surpass. Another significant level to monitor in the coming weeks is the year to date high for USD/JPY and we are very close indeed. As I’ve mentioned in the last few days it appears very much like the US dollar correction is over. The Japanese yen is one of the most like currencies to weaken against the greenback and we are already seeing clear sings of this, USD/JPY has not been as high as this since the month when the correction started, which was March. Watch this space…


As in any broad based dollar rally this is not just about the Japanese yen, the greenback is asserting itself against its major rivals, and the euro is clearly that. Newspapers have latched on to the narrative from Benoit Coeure, about the ECB accelerating its bond buying in the next few weeks before the summer lull, but was that really new news? Not really. What is clear is that the euro is over 3% weaker so far this week, that’s a pretty aggressive decline in such a short space of time, and this could signal the start of the move to parity and below that we talked about at the start of the year. It will take a bit more time to establish a target move for EUR/USD, but my initial estimate could be as low as 0.9260, albeit this is not likely to happen this year. We will update you when a more considered analysis can be conducted.


Yesterday, the UK inflation data came out with a negative print. Unsurprisingly the main news outlets screamed deflation. But that seems a bit hysterical to me, yes it’s a negative print, the first one for over 50 years just going by the “CPI” measure that’s been used. But so much manipulation and adjustment has gone into that number it is an entirely different animal to the CPI measure used in 1960. That’s not to say it isn’t noteworthy. At the end of the day, the reaction function of the central bank is key, and this is unlikely to dissuade Governor Carney from keeping rates unchanged until the middle of next year. It’s worth noting that a lot of the causes of the decline in inflation relate to the energy price collapse of last year, lower air fare and ferry ticket prices are an example of lower transportation costs that have impacted the CPI basket, all oil price related.


Eurozone CPI was also published yesterday, but was considerably more stable, with an unchanged number at +0.0%. “Excuse me!”, you might say… “Inflation in the Eurozone now higher than in the UK!? But wasn’t deflation one of the pretexts for QE from the ECB?” I would probably reply no comment to that. Today we’ll get to see the Bank of England minutes, I’m not sure what more can be said, given Governor Carney’s recent comments. Perhaps of more interest will be the minutes on the other side of the pond. The FOMC minutes will be published at 7pm London time this evening.


If indeed we are seeing the inception of a new dollar bull trend I would expect cable (GBP/USD) to make a new low for the week today. The dollar has made new highs versus both the euro and the Japanese yen already this morning, but GBP/USD is yet to follow. Cross-confirmation is always a key ingredient of an incipient trend. The day is young..









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