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  • richard evans

BoJ set to raise rates for first time in 17 years

Good morning

 

US data releases will be one hour earlier at 12.30 or 14.00 london time due to the US clock changes that took place last weekend. 

 

In addition, FX option expiries will be 14.00 london time, not the usual 15.00 london time.

 

This will be until Sunday 31st when we change our clocks in the UK.

 

 

GBPUSD spent Friday stuck in a fairly tight range, between 1.2725 and 1.2760 and not a lot has changed there since the open Sunday night.   EURUSD too has seen a similarly tight trading range that has been mostly within the 1.0880-1.0900 area. GBPUSD seems to struggle to hold gains, now 1.1695, for most of the last month it has been between 1.1670 and 1.1720, save for a couple of brief forays out of that range.  ECB officials have been pretty dovish recently but seem happy to wait until June before calling for a rate cut.

 

The US dollar saw some buying interest last week on higher inflation numbers, with some suggestion that hopes of a June rate cut are fading, with expectations being pushed back towards September, and there is a chance we’ll see less than three 25bps cuts through 2024.  Remember,  it was not that long ago that the markets were looking at up to six rate cuts from the Fed this year.  Higher than hoped inflation releases had seen the market move towards the Fed’s thinking that three cuts were more likely, now it is possible we only see one or two cuts.  The Fed’s own dot plot will be released at their rate meeting this week, more on that nearer the time.

 

Before then we have the BoJ rate announcement due in the early hours of tomorrow morning.  USDJPY spent last week pushing higher from 146.50 to a high this morning of 149.30.  The front page of the Nikkei at the weekend reportedly said BoJ would raise rates for the first time in seventeen years tomorrow, earlier than many had been expecting, as such a weaker Yen looks slightly odd.  Mind you, they are talking about a move from -0.1% to zero, so still considerably lower than many countries and we have previously been warned that BoJ would be in no rush to move away from zero.  BoJ could also lower or end bond purchases and yield curve control measures.  Note that the timings on the calendar are estimates.

 

Overnight we will also have the latest RBA rate announcement.  They are expected to keep rates unchanged at 4.35%, some think they could continue to give a hawkish message as they did last month when they made it clear they were far from convinced that inflation could be sustainable in the target range.  GBPAUD is currently around 1.9400, another hawkish tilt could see that push back down to the 1.93 area, while a surprise dovish tilt is likely to see AUD trade lower, pushing GBPAUD back to 1.95 and beyond.  

 

There will be little rest after the EU inflation and the BoJ and RBA rate announcements.  We’ve got FOMC and BOE rate announcements, UK, Japan and CAD inflation, UK retail sales,  NZ GDP, Aussie employment and a host of PMI’s from UK< EU and US. 

 

In other news, no surprise that Putin scored a resounding victory in the Russian elections, with some 87% of the vote.  13% of Russian voters will no doubt spend the next few weeks looking over their shoulders.  Putin spent his victory speech declaring how the Russian voting was more democratic that the US.  We know the US and indeed the UK have seen some questionable postal voting but I fail to see how running an election while not really allowing any  opposition can ever be deemed as democratic.

 

Sport didn’t go exactly to plan over the weekend.  I was hoping for a Scotland win against Ireland and an England win against France in the six nations, plus of course I was looking for Spurs to beat Fulham.  All of those went horribly wrong.  There was a shining light for Mark as Leeds took top spot in the Championship with a win over Millwall.  Their main rivals, Leicester, have seen a lead of something like 17 points slip away in recent weeks.

 

The FA cup threw up some very exciting matches, the last ten minutes of Wolves v Coventry saw three goals which sent Coventry through, while yesterday we saw a spirited Man Utd knock out Liverpool in extra time in a seven goal thriller, in what must have been one of the best FA cup ties for a long time.  They now face Coventry in the semi-finals, while Man City take on Chelsea. 

 

That’s about all for now.  I hope you enjoyed the weekend, the weather certainly on Saturday was pretty decent, the lawn got mowed, just as well given the alarming rate with which it grew in the last week, and I managed a few other chores in the garden while also managing to watch some sport and meet some friends.  All in all a good weekend.  Dare I say the forecast is now looking a touch better than it did a week or so ago, we’ve not seen the last of the rain but it doesn’t look quite as bad looking ahead.  Mornings and evenings still getting lighter

 

-  10.00 EU HICP

-  03.00 BoJ rate announcement

-  03.30 RBA rate announcement

-  04.30 RBA press conference

-  06.00 BoJ press conference

 

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