Good morning,
FIFA and Apple TV are gearing up for a soccer showdown as they close in on a broadcast deal for the 2025 Club World Cup, set to be a star-studded affair with teams like Man City and Real Madrid taking the field. Apple TV, no stranger to the football scene after bagging a hefty deal with Major League Soccer, is eyeing another coup. According to the New York Times, FIFA might be cutting Apple a bargain, with rights potentially going for a whopping 1 billion dollars. With big names and big bucks on the line, it’s game on for the tech giant and the soccer overlords.
Last Week
Last week saw a flurry of activity in the financial world, with all eyes trained on the Federal Reserve. Amidst escalating inflationary pressures and shifting economic forecasts, BNP Paribas and Macquarie recalibrated their predictions, delaying expectations of a US interest rate cut until December. Meanwhile, US labour costs surged, amplifying concerns over inflation and tempering hopes of imminent rate cuts. Against this backdrop, the EURUSD exchange rate found buoyancy on strong Eurozone economic data, casting a spotlight on potential parity amidst speculations of ECB rate cuts. As the week drew to a close the Non Farm payroll report missed expectations for the first time in six months, underscoring the prevailing uncertainty in markets grappling with inflationary forces and the trajectory of monetary policy.
BCA Research, a reputable economic research and strategy provider, asserts that the British Pound stands as an enticing ‘long’ contender against the Euro and other G10 currencies. Contrary to market sentiment, they anticipate that the Bank of England will implement fewer interest rate cuts in 2024 than currently anticipated. This revelation arrives just ahead of the Bank of England’s May 9 interest rate decision, where speculation looms over the possibility of a June rate cut. Presently, the market is priced for approximately two 25 basis point rate reductions from the Bank of England this year, with the first slated for August. April witnessed the Pound facing downward pressure as expectations for further rate cuts mounted, with the Pound to Euro exchange rate slipping to a multi-week low at 1.1570. As the Bank’s decision looms, the Pound remains vulnerable to renewed declines should rate cut expectations escalate once again.
Throughout the week, the Japanese yen has been under intense scrutiny, with its movements against the US dollar prompting speculation of intervention by Japanese authorities. Starting the week on a volatile note, the yen breached another crucial level against the dollar, triggering rumors of impending intervention. Despite a recovery in Asian equities midweek, the yen’s fluctuations persisted. Thursday saw a sudden 2% strengthening of the yen against the dollar, suggesting intervention to bolster the currency. Closing the week, the yen surged further amidst a broader US dollar selloff, leading to speculation of continued intervention by Japanese authorities to strengthen the yen, highlighting the ongoing battle between the central bank and wider FX market.
This Week
Britain’s economy has clawed its way out of last year’s shallow recession, tentatively entering a recovery phase. Tepid growth in the first quarter, coupled with more robust momentum anticipated in the second, signals a promising trajectory. However, amidst this resurgence lurks the spectre of persistent inflation, with core CPI rates stubbornly above 4% and warnings of further acceleration in the months ahead. In light of these inflationary pressures, the Bank of England is unlikely to signal immediate rate cuts at its upcoming meeting, aligning with investor expectations for the first cut to come in August. This stance could bolster the pound, especially considering its resilience against the euro and yen.
The Reserve Bank of Australia (RBA) convenes in its own policy meeting early Tuesday with no major policy shifts anticipated. Recent economic indicators suggest a sustained neutral stance, with both consumer and producer inflation surpassing expectations in the first quarter, hinting at a slower-than-expected path to curb inflation. The robustness of the labour market and the resurgence in China’s industrial sector further reinforce the RBA’s stance, with potential benefits for Australian growth. While the RBA may adopt a slightly more hawkish tone, it’s unlikely to signal another rate increase at this juncture. With global risk sentiment and developments in China dictating the Australian dollar’s trajectory, Thursday’s release of China’s trade numbers holds particular significance for currency markets.
Key Events
Tuesday May 7th
05:30 Australian Monetary Policy Statement
Thursday May 9th
12:00 Bank of England Monetary Policy Statement
12:30 BOE Governor Bailey Speaks
13:30 US Unemployment Claims
18:01 US Bond Auction
Friday May 10th
07:00 UK GDP
13:30 Canadian Unemployment Rate
15:00 US Consumer Sentiment
Have a great week,
The Garton Team