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  • richard evans

Central bankers remain centre stage after hawkish moves last week

Good morning

Thursday seems like a long time ago. The last message I sent reported a move in GBP after the BoE rate announcement, but through Thursday afternoon GBP pushed higher, GBPUSD reaching 1.24 and EURGBP almost touching 0.8510 (GBPEUR 1.1750). It has failed to hold onto those gains, now trading 1.2240 and 0.8600 (1.1630) respectively, but still above pre-BoE announcement levels.

I had also mentioned USDJPY last Thursday, a move that saw it trade down to 131.50 but through Friday it clawed its way back up to pretty much the recent highs around 135.50. Since come a little lower, 134.65 as I type, but something tells me we haven’t seen the end of Yen volatility. Elsewhere in Asia, PBoC kept rates unchanged, USDCNY dropped sharply lower from 6.7150 or so to 6.6700, while some interest in USDPHP which is trading higher to 54.00 despite talk of pending rate rises.

Euro has seen similar swings, EURUSD trading from 1.0380 to 1.0600, now 1.0520. ECB have again made it clear they will do all they can to limit panic in the bond markets, while Macron loses his majority with 245 seats with the far right National Rally winning 89 seats, double what they were really expecting. Macron will now have his work cut out with both the left and right likely to do their best to disrupt many proposed reforms.

AUD could be in for some excitement overnight with Gov Lowe speaking as well as the release of the RBA minutes. AUDUSD now 0.6980, AUDNZD 1.1000, GBPAUD 1.7505.

Major central banks, other than BoJ, have been hawkish recently, and Feds Waller made it clear another 75bps move in July is his favoured move if data comes in as expected, he’d probably have looked for a 1% rise in June but was concerned it would impact the market too much. He makes it clear there is a long way to go to reach neutral rates and even further to have a restrictive rate. He says his aim is to get inflation down. The problem he, and other central bankers face, is this high inflation with signs of weakening demand.

We have a host of central bank officials speaking today, including Lagarde this afternoon but as you know she rarely says anything that impacts the market, worth being on our toes though just in case. We also have BoEs Haskell and Mann speaking today, both voted for a 50bps increase at last weeks meeting so their comments may attract more attention.

So into the new week, its another US holiday today, they do seem to have more than their fair don’t they. At home, we have the sun shining which looks great although I have to say once again I struggled with a bit of hayfever Friday as I made my way round a couple of University open days with my daughter. However I mowed the lawn yesterday wearing a Covid mask which seemed to work wonders, no snivels at all. Could be the way forward. Just hope I don’t get an odd shaped tan. I did read that a new over the counter hayfever tablet is now available, was previously prescription only. If contains Fexofenadine, I’m tempted to give it a go. I’d be interested to hear from anyone who has tried it.

For some people, a rail strike this week will cause chaos. I’m not a fan at all of strikes and am surprised they are still legal. A strike on Tuesday, Thursday and Saturday means the whole week will be a nightmare, right in the middle of A levels. Shouldn’t be allowed. I’ve not bothered looking to see why they are striking, presuming they want more money, more pensions, more holidays. Yeah, don’t we all. I guess the only saving grace is that by now most people are more capable of working from home so I’m hoping the impact is slightly reduced and although not everyone has that flexibility.

- 09.00 BoEs Haskel speaks

- 10.00 EU construction output

- 11.00 German Buba monthly report

- 14.00 BoEs Mann speaks

- 14.00 ECBs Lagarde speaks

- 22.00 NZ Westpac consumer survey

- 01.00 RBAs Lowe speaks

- 02.30 RBA minutes

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