Are central banks turning slightly hawkish?

Good morning

Asian shares slipped back overnight, the fear of Chinas hard line on certain industry sectors still creating uncertainty. Shares in the tech firm Tencent dropped 10% after Chinese media called online gaming ‘spiritual opium’, perhaps to become the next target of the China clampdown. Meanwhile China are reported to have issued a ‘buy China’ mandate

RBA kept policy on hold overnight, but are on track with their plans to reduce asset purchases later this year. AUD did push higher after the announcement, helped by RBA raising 2022 and 2023 inflation forecasts but some suggestions that Aussie retail sales numbers due tonight are likely to be affected by the ongoing lockdowns seems to be enough to prevent further gains.

Feds Waller, generally regarded as neutral, was reasonably hawkish, saying an announcement could be made on tapering in Sept, if the next couple of employment releases are strong. Friday sees the next nonfarm payrolls, a strong number could well encourage the market to look at Fed reducing asset purchases.

With Wallers comments, and RBA remaining reasonably hawkish despite the lockdowns, there is a feeling that BoE could also be a little more hawkish than expected at its meeting on Thursday. GBP not really reflecting this right now, GBPUSD at 1.3900 and EURGBP at 0.8540 (1.1710).

It was my daughters 16th birthday yesterday, we popped up to London for a rather pleasant meal. Despite travelling outside peak hours the tube was busier than I have experienced recently and walking around the Marylebone area I was surprised how many people were wandering around. People are clearly returning to their offices. It has been a few weeks since I was up in the City, last time it still seemed very empty. I may be up there later this week, will be interesting to see if that feels any busier.

I would add that the vast majority of tube travellers were wearing face masks which was brought some comfort. On a fairly busy train I saw only two people without a mask, they may well have reasons for that but as we know there are people who simply cannot stick to rules. I’ll continue to wear mine on public transport for a while yet, that’s for sure.

No one really likes wearing a mask, but a mask serves two purposes. One, to protect the wearer, but two, to protect other passengers. I don’t mind if someone feels invincible enough to not wear a mask, but they are putting others in potential danger by not wearing one. It’s a bit off really.

- 10.00 EU PPI

- 14.30 CAD markit manufacturing PMI

- 15.00 US factory orders

- 23.45 NZ unemployment

- 00.00 AUS commonwealth bank services PMI

- 02.30 AUS retail sales

- 02.45 China caixin services PMI