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  • richard evans

BoC latest central bank to slower rate rises

Good morning

I’ve spent the last couple of days scouring more Universities for my daughter, I think we’ve now done all the ones she’s thinking about and I can put my feet up for a while before the bills start rolling in. I have returned to see GBPUSD higher, now 1.1600, did actually get to the mid-1.16s overnight, but it looks more like general USD weakness that has driven this. EURUSD is above parity for the first time in nearly six weeks, USDJPY is down at 145.75.

In the UK Sunak, our latest PM, and Chancellor Hunt have announced a delay to the release of the medium term fiscal plan for a couple of weeks to 17th November and have changed it to a full Autumn statement. The markets took this delay reasonably well, certainly there were no signs of panic. Sunak has made it clear our economy is at a difficult stage and there will be some tough decisions that need to be made. Sunak has made it clear that a negotiated agreement over the NI protocol is the preferred route.

Bank of Canada raised rates by 50bps yesterday, less than the 75bps market had been expecting, signalling that although inflation remains high, their tightening cycle could be coming to an end and highlighting that central banks may well start to rein in their increases for fear of damaging their economy. USDCAD traded up to 1.3650 on the announcement but is back just below 1.3600 as I type. Support comes in at 1.3500.

BoJ have a rate meeting overnight, policy expected to remain broadly unchanged but we’ll look for any comment regarding yen depreciation and intervention.

Shell has unveiled third quarter profits of $9.5bn, on top of the $11.4bn profit from the previous quarter. Energy prices might be high but the energy firms are enjoying the moment, at a time when domestic bills are higher than ever.

ECB rate announcement due this afternoon, a 75bps raise is widely expected and priced in. There has been something of a slowdown in the EU so maybe some risk of ECB following BoCs line and delivering just a 50bps rise. However I’m inclined to look for the full 75bps although wouldn’t expect to see much upside impact in EUR. The press conference will be closely watched for any clues as to where rates might peak.

US GDP also released this afternoon, market looks for a healthy rebound to around +2.5% from the -0.6% last time round but there are concerns this will be driven by a drop in imports led by lower consumer spending, not exactly grounds for healthy growth. Some are looking for a recession by mid-2023.

As is always the case when I’ve had a couple of days off, I’m struggling this morning to put pen to paper, or finger to keyboard to be more accurate, so I’m going to leave it there for the time being.

- 13.15 ECB rate announcement

- 13.30 US GDP, durable goods, PCE, initial jobless claims

- 13.45 ECB press conference

- 00.30 Japan unemployment, Tokyo CPI

- 04.00 BoJ rate announcement

- 07.00 BoJ press conference

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