Tuesday 12th Morning Comments - UK focussed

 Good morning everyone. Welcome to the usual rundown of morning comments - I've tended to only share these via email before, but I will try to also occasionally share to the blog too. 

If you'd like to be added to the distro list, do let me know. 

What's moving this morning? 

Looking across the markets, seems like the USD is broadly stronger with the EUR dropping below the 1.156 level I've had my eye on and GBP also making an aggressive move to the downside - those gains from hawkish bets didn't last for long!

The S&P500 has been on the downtrend recently too. I have my eye on the marked trend lines below which I think has been quite interesting. Look for resistance again now around 4360. For now, I continue to favour shorts but watch those lows for a couple of opportunities. 

I've already mentioned GBP once, but Bloomberg is reporting the downturn is as a result of expected policy error from the BOE. With traders ramping up their short bets. 

Money markets are pricing in a hike at the BOE by year-end and another 50bps of policy tightening to come pretty quickly after that. With this backdrop, I am a touch surprised that the £ is falling on the "possibility" the BOE is about to make a mistake. I wonder if the broader narrative here is just a USD backstory more than anything else. But nonetheless, there could be upside for the £ if the inflation narrative globally turns out to be permanent, which would mean the BOE was ahead of the rest when it comes to hikes. 

Also from the UK, we had a payrolls report which showed continuous recoveries (increase of 207k - actually above US...) in the economy with payrolls above pre-covid levels with record hiring. At the same time, vacancies rose to a record 1.2m, which indicates this labour market is still very tight and could prove to be further inflationary. The unemployment rate dropped to 4.5%. 

Finally from the UK, and this is a fairly long-term point: reports suggesting the UK's budget could be £15bn worse-off as rates increase debt repayments. This with the Chancellor's Autumn budget coming up could signal less room for further accommodation and pullbacks on the size of some programs. 

In Europe, in ESG, they are set to issue the largest ever green bond today - at 12bn EUR. This will be one to watch to see how the market handles the appetite for green on such a large issue. 

Final thing: LVMH is due to report sales figures today - this will be important for the rest of luxury as it will indicate whether there has been any difficulties for LVMH in the quarter. 

What's coming today? 

Survey data in the form of the ZEWs. This is actually my least favourite data since it's a survey of investors and truth be told we're rather schizophrenic folk so it's not particularly insightful in my view, but we move. 

In the US, we have JOLTs data at 3pm, and speeches from Clarida. A reminder, Clarida is in the middle of the hawk-dove O-meter, so this could be an interesting one. We also have a USD58bn auction today for 3y bonds and USD38bn for 10y bonds, so it'll also be interesting to see how the market swallows such a large auction. 

That's all for today - happy trading everyone.